An accredited investor meets a legal eligibility category used in many private securities offerings. That status can determine whether you may invest, but it does not establish that an investment fits your needs. Start by understanding the qualification rules, then separately evaluate the business and its risks. The SEC explains the role of accreditation in private-market access.
Common ways individuals qualify
Under the SEC's current criteria, an individual can qualify through several routes, including:
- Net worth exceeding $1 million, individually or jointly with a spouse or spousal equivalent, excluding the primary residence.
- Income exceeding $200,000 individually, or $300,000 jointly with a spouse or spousal equivalent, in each of the previous two years, with a reasonable expectation of reaching the same income level this year.
- Certain professional credentials held in good standing, including Series 7, Series 65, or Series 82 licenses.
These are common examples, not the complete definition. Other categories cover certain insiders, knowledgeable employees of private funds, and qualifying entities. Review the SEC's accreditation criteria with a qualified adviser if your circumstances are unclear.
Do not count your home's market value toward the net-worth threshold. Debt secured by the residence also has special treatment, so a simple total of assets minus every liability may not produce the correct figure. The SEC's private-placement bulletin explains the basic residence exclusion.
Why an investor portal asks for verification
Rule 506(c) permits an issuer to advertise an offering broadly, provided all purchasers are accredited investors and the issuer takes reasonable steps to verify their status, alongside other requirements. That is why an eligibility question can lead to a request for supporting information. SEC guidance on Rule 506(c).
The rules provide several verification methods. These include reviewing specified financial records or obtaining a qualifying written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or CPA. The requirements vary by method; simply knowing one of these professionals is not verification. Rule 506(c)'s verification provisions(2)(ii)).
Before uploading sensitive documents, ask which method the issuer accepts, who will review the information, and how it will be protected. Confirm the request through the issuer's established contact information.
Eligibility and investment review are separate steps
Once eligibility is established, work through the investment itself. Ask for the offering documents and identify the investment strategy, fees, conflicts of interest, reporting practices, and restrictions on getting your money back.
Private placements can involve limited disclosure, significant illiquidity, and the possibility of losing the entire investment. The SEC's investor bulletin describes these risks. Consider how a long holding period or loss would affect your broader financial plans, even if you comfortably satisfy an accreditation test.
A useful habit is to keep two written lists: documents needed to establish eligibility, and questions you need answered before deciding. Finishing the first list should not rush the second.
Common questions
Can a non-accredited person invest in a private offering?
Some exemptions allow it under specific conditions. Rule 506(b), for example, permits limited participation by qualifying non-accredited investors and prohibits general solicitation. Rule 506(c) requires accredited purchasers. The SEC compares these exemptions.
Does forming an LLC make me accredited?
No. An entity must satisfy an applicable qualification category. Creating an LLC by itself does not establish eligibility. Review the SEC's entity criteria.
Which Fajr offering is current?
Fajr Income Fund is the current Rule 506(c) offering for verified accredited investors. Fajr Fund One is the closed, historical Rule 506(b) fund. Review the current fund's requirements and approach on the Fajr Income Fund strategy page. Subscription documents and acceptance by the fund are also required.
General education only, not individualized investment, legal, or tax advice. Offering documents govern any investment.