Who qualifies as an accredited investor?

An accredited investor is defined by certain financial criteria established by the Securities and Exchange Commission (SEC). One of the key qualifications is having a net worth of at least $1 million, but this figure must exclude the value of the individual’s primary residence. This exclusion is important as it ensures that the individual possesses significant assets that can be used for investment purposes without reliance on personal housing equity.

This definition is significant as it allows accredited investors access to private offerings and certain investment opportunities that are not available to the average investor, based on the assumption that they have the financial sophistication and ability to bear the risks involved.

While the other options present various criteria, they do not meet the established definition set by the SEC for accredited investors. For instance, including the primary residence in the net worth calculation misrepresents the investor's liquidity and investment capacity, while financial literacy alone does not qualify a person as an accredited investor without meeting the net worth or income thresholds.