What does the term 'accredited investor' mean?

The term 'accredited investor' refers to an individual or entity that meets specific income or net worth criteria set by regulatory authorities, such as the Securities and Exchange Commission (SEC) in the United States. This classification is important because it determines who can participate in certain types of investment opportunities, particularly private placements and hedge funds, which are often not available to the general public.

Generally, an accredited investor is defined as someone who has an annual income exceeding $200,000 (or $300,000 with a spouse) for the last two years, or has a net worth of over $1 million, excluding their primary residence. This status allows individuals to engage in higher-risk investment opportunities that typically have fewer regulatory protections, under the assumption that accredited investors are more experienced or financially capable of understanding and managing these risks.

The other options do not accurately define an accredited investor. A public investment track record pertains to the history of an investor's public dealings, but it is not a requirement for being considered accredited. Additionally, investing exclusively in publicly traded companies does not define an accredited investor, as accreditation specifically relates to the investor's financial qualifications rather than the types of investments they choose. Lastly, there is no designation of individuals based solely on investing less than a