Accredited Investor Requirements: What the SEC Actually Requires

Private real estate offerings like syndications and funds — including much of the accredited investor real estate market here in Los Angeles — are generally only open to accredited investors, a status defined by the SEC, not a marketing term. Understanding exactly what qualifies you (or doesn't) is the first practical step before evaluating any private placement.

What Is an Accredited Investor?

An accredited investor is an individual or entity that meets specific financial or professional criteria set by the SEC under Regulation D. The requirement exists to limit certain higher-risk, less-liquid, and less-regulated private offerings to investors presumed to have the financial sophistication — or the financial cushion — to bear that risk.

The Income Test

An individual qualifies if they have earned income exceeding $200,000 in each of the two most recent years (or $300,000 combined with a spouse or spousal equivalent), with a reasonable expectation of reaching the same income level in the current year.

The Net Worth Test

An individual also qualifies with a net worth exceeding $1,000,000, either alone or jointly with a spouse, excluding the value of their primary residence. Any debt secured by the primary residence in excess of the home's value is counted as a liability against net worth, and any increase in mortgage debt in the 60 days before investing is also counted, to prevent inflating net worth right before qualifying.

Professional Certifications and Other Paths

Since a 2020 SEC amendment, individuals holding certain professional licenses in good standing — Series 7, Series 65, or Series 82 — qualify as accredited investors regardless of income or net worth. "Knowledgeable employees" of a private fund also qualify with respect to investments in that fund. Certain entities qualify as well, including banks, registered investment advisers, and entities with total investments exceeding $5 million that were not formed for the specific purpose of making the investment.

How Verification Actually Works

How an investor's accredited status gets verified depends on how the offering is structured. Offerings conducted under Rule 506(b) of Regulation D do not involve general solicitation or advertising, and issuers commonly rely on investor self-certification as part of a pre-existing relationship. Offerings conducted under Rule 506(c), which permits general solicitation, require the issuer to take reasonable steps to verify each investor's accredited status — self-certification alone is not sufficient. Verification is typically satisfied through a letter from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or CPA, or through a third-party verification service.

How Long Is an Accredited Investor Verification Letter Good For?

Under the SEC's guidance for Rule 506(c) offerings, a third-party verification letter is generally treated as valid for up to 90 days from the date it was issued. Because financial circumstances can change, most issuers will not accept a verification letter older than that window and will ask for a fresh one.

A Note on This Article

This is general educational information about the SEC's accredited investor framework — it is not an offer to sell securities, and it does not describe the terms of any specific Assemble Capital offering. Any actual investment opportunity is made available only through formal offering documents, and only to investors who meet the applicable requirements under that offering's specific exemption.

This article is for general informational and educational purposes only. It is not, and should not be relied upon as, investment, legal, tax, or accounting advice, and it is not a recommendation or endorsement of any strategy or investment. Consult your own financial, tax, and legal advisors before making any investment decision. See our full Risk Disclosures for additional information.