Investing What Is a Non-Accredited Investor? Non-Accredited Investor Explained in Less Than 4 Minutes By Jacqueline DeMarco Jacqueline DeMarco Instagram Website Jacqueline DeMarco has 7+ years of experience researching and writing dozens of articles. She covers investing, taxes, credit cards and scores, loans, banking, budgeting, and more for The Balance. Jacqueline has been published on LendingTree, Credit Karma, Fundera, Chime, MagnifyMoney, Student Loan Hero, ValuePenguin, SoFi, Northwestern Mutual, and more. learn about our editorial policies Updated on May 31, 2022 Reviewed by Michael J Boyle Reviewed by Michael J Boyle Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Definition & Examples of Non-Accredited Investor How Being a Non-Accredited Investor Works What Individual Investors Need To Know Definition A non-accredited investor is a type of investor who fails to satisfy Rule 501 of Regulation D of the SEC’s accredited investor test. This means that the investor in question has a net worth of less than $1 million and their individual income is less than $200,000 per year, or $300,000 if married. Photo: PeopleImages / Getty Images A non-accredited investor is a type of investor who fails to satisfy Rule 501 of Regulation D of the SEC’s accredited investor test. This means that the investor in question has a net worth of less than $1 million and their individual income is less than $200,000 per year, or $300,000 if married. If you’re a non-accredited investor, you won’t have the same investment opportunities as an accredited investor. However, there are upsides to your status, including increased protections from risky investments. Here’s what you need to know about the limitations and benefits of being a non-accredited investor. Definition and Examples of a Non-Accredited Investor Non-accredited investors fail to qualify as accredited investors under the U.S. Securities and Exchange Commission (SEC) accredited investor test standards. If an investor does not meet Rule 501 of Regulation D, they are considered to be a non-accredited investor. To be considered an accredited investor, you must have: Have a net worth, excluding any primary residence, of at least $1 million.Have earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years and reasonably expect the same for the current yearHold a Series 7, 65 or 82 license in good standing While an accredited investor can be a company or bank, this term is most commonly used to describe an individual. Accredited investors are considered financially sophisticated enough to manage their own investing activities—or wealthy enough to withstand significant losses—without needing SEC protections. The idea is that these investors know enough about the risks of investing to determine whether an asset or venture is a worthwhile use of their money. Alternate name: retail investors The term “retail investor” often refers to non-accredited investors. Only 13% of American households were considered accredited investors in 2020, according to the SEC. That means the majority of investors in the U.S. are unaccredited. If you do most of your investing through your employer’s 401(k) and your net worth is primarily tied to the value of your primary residence, you are most likely a non-accredited investor. Note The SEC can alter the definition of accredited investor to account for factors such as inflation or to expand investment types to more of the population. How Being a Non-Accredited Investor Works In many states, there are “blue sky” laws in place that set limits on how many non-accredited investors can be included in a financing round before companies have to make more disclosures. The SEC also has regulations in place to determine what a non-accredited investor can invest in, as well as how those investments need to handle documentation and transparency. If you are an accredited investor under these federal securities laws, you can participate in certain securities offerings that non-accredited investors cannot. Note Some rules around these types of investors may seem limiting—and in truth, they are—but they are in place to protect more novice investors who may not understand the risks involved or be able to sustain large losses as well as those who qualify as accredited investors. What Individual Investors Need To Know Being a non-accredited investor does limit your potential investment opportunities. For example, if you’re an accredited investor, you can invest in restricted securities, venture capital, and hedge funds. These investments come with significant risks, but also the potential for high rewards. Non-accredited investors do not have the opportunity to profit from these investments. The limitations on non-accredited investors can be frustrating but help prevent less experienced investors from losing money in high-risk projects. The SEC limits investment choices for non-accredited investors to protect them. The agency was created after the 1929 stock market crash to protect regular consumers from making investments they couldn’t afford to make or would struggle to understand properly. Key Takeaways A non-accredited investor fails to satisfy Rule 501 of Regulation D of the SEC’s accredited investor test.To be considered a non-accredited investor, the investor will have less than a $1 million net worth and receive less than $200,000 a year in income (or $300,000 if married) and not hold a Series 7, 65 or 82 license.Many states have blue sky laws in place that set limits regarding how many non-accredited investors can be included in a financing round before a company has to make more disclosures.The SEC limits investment choices for non-accredited investors to protect them from losses they can’t afford and from making investments they don’t fully understand. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Code of Federal Regulations. "Regulation D, Section 230.501." Accessed Nov. 2, 2021. Investor.gov. "Accredited Investors – Updated Investor Bulletin." Accessed Nov. 2, 2021. U.S. Securities and Exchange Commission. "Accredited Investor Definition." Accessed Nov. 2, 2021. U.S. Securities and Exchange Commission. "Frequently Asked Questions About Exempt Offerings." Accessed Nov. 2, 2021. U.S. Securities and Exchange Commission. "Investor Bulletin: Private Placements Under Regulation D." Accessed Nov. 2, 2021.