In the United States, the SEC (Securities and Exchange Commission) defines the eligibility criteria for an Accredited Investor. An accredited investor is a way for the regulators to determine the relative sophistication of the investor or entity and allow them to engage in financial transactions away from the traditional stock markets.
As per SEC guidelines: 1) Earned income that exceeded $200,000 (or $300,000together with a spouse) in each of the prior two years, and reasonably expects the same for the current year,
OR
2) has a net worth over $1 million, either alone or
together with a spouse (excluding the value of the
person’s primary residence).
If one is an accredited investor, they can participate in financial transactions that are not registered with the SEC such as angel investments, venture capital, hedge funds, and private placement transactions.
Beyond the income and net worth, exemptions are granted to certain entities engaged in the investment arena as well as to those professionals who have demonstrated expertise in dealing with unregistered securities.