An accredited or sophisticated investor is an investor with a special status under financial regulation laws. The definition of an accredited investor, and the consequences of being classified as such, vary between countries. Generally, accredited investors include high-net-worth individuals, banks, and other large corporations, who have access to complex and higher-risk investments such as venture capital, hedge funds and angel investments.
An accredited investor is a person that fulfills the requirements set by the securities and exchange commission of a country. These investors are considered to be financially strong and have reduced need of protection that is offered by government fillings. Examples of accredited investors include banks, insurance companies, trusts, and employee benefit plan.
In the US the term accredited investor is described in Rule 501 of Regulation D of the SEC. Some of the requirements that must be fulfilled by investors to be considered as accredited include the following.
Investors that fulfill the above criteria are said to be accredited investors.
These investors don't face a number of restrictions imposed by the SEC that are applicable to unaccredited investors. Moreover, they are allowed to take on greater risks as compared to traditional investors.
Due to high net worth, accredited investors are able to invest in high risk investment options that are restricted for regular inventors. The riskier investment option entails a higher growth potential that greatly increase the odds of the investor earning greater returns on investment. Some of the financial options that are open for accredited investors include commodity funds, hedge funds and certain public funds that are not open to regular investors. A company that limits its investment offer to accredited investors gains by not having to meet certain regulatory requirements.
Financial education is so important, but barely taught at all in our schools. Having resources online is great, but not if they are inaccessible to so many. Thanks 508!