What Is a Non-Accredited Investor?

By: Daniel A. Perry 

Non-Accredited Investors

In a recent article, I discussed the definition of an Accredited Investor as defined by the Securities and Exchange Commission. Today, I will discuss the definition of a Non-Accredited Investor. Quite simply, a Non-Accredited Investor is an individual that does not meet the definition of an Accredited Investor.

These terms were designated and defined in Rule 501 of Regulation D by the SEC. A Non-Accredited investor is a person that does not have annual income exceeding $200,000 per year, or $300,000 per year for joint income, for the last two years. In addition, a Non-Accredited Investor is a person who does not have a net worth exceeding $1 million.

Background and Implications

As we discussed previously, the Securities and Exchange Acts of 1933 and 1934 were designed to protect the investing public following the Stock Market Crash of 1929 and the ensuing Great Depression. If you are a Non-Accredited Investor, it would be illegal for you to invest in certain types of unregistered securities.

More importantly, if you operate and manage private equity funds, hedge funds, or other types of unregistered securities the act of allowing a Non-Accredited Investor to invest in an unregistered security can subject you to significant liability and regulatory action by the SEC and other regulatory agencies.

For more information

If you have a question about securities law, Private Equity Funds, Hedge Funds, and compliance with Rule 501 of Regulation D, please contact our office at (513) 241-0400. You can also fill out the contact form and one of our Securities Attorneys will respond to your questions.