Written by: Joshua R. Kotter
Attorney review: Joshua R. Kotter
Jurisdiction: Federal and Utah securities law; other state laws may apply
Last reviewed: September 4, 2026
Next review: December 4, 2026, or sooner if controlling law or guidance changes

“Accredited investor” is an eligibility classification used in several federal private-offering exemptions. It is not a government endorsement of an investor, a promise that an investment is suitable, or a substitute for disclosure and antifraud compliance. For an issuer, the right question is not merely whether an investor is accredited. The issuer must identify a valid offering exemption, satisfy every condition of that exemption, address state-law obligations, and preserve evidence of compliance.

Who may qualify as an accredited investor

Under the current federal definition summarized by the U.S. Securities and Exchange Commission, an individual may qualify through wealth, income, or certain professional criteria. The familiar financial tests include net worth above $1 million, alone or with a spouse or partner, excluding the value of the primary residence; or income above $200,000 individually or $300,000 with a spouse or partner in each of the prior two years, together with a reasonable expectation of reaching the same level in the current year.

Financial thresholds are not the only route. Individuals may also qualify through specified securities licenses held in good standing, status as a director, executive officer, or general partner of the issuer or its general partner, and certain roles involving private funds or qualifying family offices. Entities may qualify through specified regulated status, assets or investments above applicable thresholds, or because all equity owners are accredited investors. The precise rule text and the investor’s facts control; an informal label such as “sophisticated” or “high net worth” is not enough.

Accredited status does not select the exemption

Federal law generally requires every offer and sale of a security to be registered or to fit an available exemption. The exemption is selected and documented at the offering level. Different exemptions impose different rules concerning purchasers, solicitation, offering amount, disclosure, resale, verification, intermediary conduct, and filing.

Rule 506(b) of Regulation D generally prohibits general solicitation. It permits sales to an unlimited number of accredited investors and, subject to the rule’s conditions, a limited number of non-accredited investors meeting the applicable sophistication standard. Rule 506(c) permits general solicitation, but every purchaser must be accredited and the issuer must take reasonable steps to verify accredited status. A purchaser’s unchecked representation may not, by itself, satisfy Rule 506(c)’s verification requirement.

Rule 504 can support certain offerings up to the current federal limit stated by the SEC, but its conditions and state-law treatment differ from Rule 506. Regulation Crowdfunding, Regulation A, intrastate exemptions, Section 4(a)(2), and other paths solve different capital-raising problems. Choosing among them requires attention to where investors are located, how they will be contacted, how much capital is sought, what information will be provided, whether non-accredited investors may participate, and how quickly the offering must close.

Verification and recordkeeping

Verification should be designed before solicitation begins. For Rule 506(c), the issuer should determine which verification methods will be used, who will review sensitive records, how privacy will be protected, and what evidence will be retained. Depending on the method, review may involve income records, net-worth records, or written confirmation from a qualified third party. The rule and current SEC guidance should be checked rather than relying on an old checklist.

For any offering, the file should show the exemption analysis, approval process, investor communications, offering materials, subscription documents, investor questionnaires, verification or reasonable-belief evidence, state notices, federal filings, use-of-proceeds records, and material changes made during the offering. The documents should agree with one another. A cap table, slide deck, email, website, social post, webinar, and subscription agreement can all become part of the record.

Form D and state securities law

The SEC’s current guidance states that a Form D notice is required for Regulation D offerings and is generally due within 15 days after the first sale. A Form D is a notice filing; it does not mean the SEC approved the offering. Missing or late filings can create avoidable problems and may affect state notice obligations.

Federal exemption does not erase state law. Rule 506 offerings are federal covered securities, but states can require notice filings and fees and retain antifraud enforcement authority. Other exemptions may require a separate state exemption or registration analysis. The Utah Division of Securities publishes a current exemption table, filing resources, and guidance for raising capital in Utah. It also warns that there is no automatic “friends and family” exemption.

Disclosure and antifraud obligations remain

An exemption from registration is not an exemption from antifraud law. Statements to investors must not contain a material misstatement or omit a material fact needed to make what was said not misleading. This principle reaches formal offering memoranda and less formal communications alike.

Material information may include the issuer’s business and stage of development, capitalization, management, conflicts, compensation, related-party transactions, financial condition, use of proceeds, restrictions on transfer, dilution, liquidity, regulatory risk, litigation, intellectual property, dependency on key people or customers, and the assumptions behind projections. The appropriate disclosure depends on the offering and the issuer. Boilerplate does not cure a projection or sales pitch that creates a misleading overall impression.

Intermediaries, finders, and transaction-based compensation

Paying someone to introduce or solicit investors can raise broker-dealer or agent-licensing questions even when the offering itself is exempt. Titles such as consultant, adviser, business broker, or finder do not decide the issue. The person’s activities, authority, solicitation, negotiation, handling of funds, and compensation structure matter. Issuers should analyze intermediary status before agreeing to transaction-based compensation or permitting a third party to contact investors.

What investors should understand

Accredited status can permit access to offerings that provide less standardized public information and involve illiquidity, transfer restrictions, concentrated risk, and limited exit rights. Qualification does not establish that a particular investment is prudent. Investors should independently evaluate the issuer, management, financial information, conflicts, valuation, use of proceeds, governing documents, dilution, transfer limits, reporting rights, tax consequences, and realistic path to liquidity.

A defensible offering workflow

Before making offers, identify the instrument and the jurisdictions, choose a federal and state-law path, decide whether general solicitation will occur, define investor eligibility, and build the disclosure and verification process. During the offering, control versions of materials, keep communications consistent, monitor eligibility, document approvals, make timely filings, and address material changes. After closing, update ownership records, satisfy reporting and contractual obligations, preserve the compliance file, and monitor resale limitations.

For related legal services, review securities and investment law.

Official sources and further reading

Legal-information notice: This article provides general information and is not legal, tax, accounting, or investment advice. Securities-law analysis is fact- and jurisdiction-specific. Reading this article or contacting the firm does not create an attorney-client relationship.

This archived article provides general information and may not reflect later changes in law or procedure. It is not legal advice. Contact the firm for an evaluation of a specific matter.

Accredited Investors and Exempt Offerings: From the Firm Archive

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