A more thorough explanation:

An accredited investor is a special type of investor who is allowed to buy unregistered securities due to certain special circumstances or qualities. This exemption is granted under federal law, which states that no securities may be sold or offered for sale unless they are registered or unless there is an exemption.

There are several types of accredited investors, including:

• Banks
• Savings and loan associations
• Brokers or dealers
• Investment advisors
• Insurance companies
• Business development company
• Small Business Investment Company
• Rural Business Investment Company
• State plans for the benefit of its employees (with total assets more than $ 5,000,000)
• Employment benefit plan (by plan fiduciary)
• Private business development company
• Any tax-exempted organization under section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets more than $5,000,000
• Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer
• Natural persons with individual net worth, or joint net worth with spouse of partner, exceeds $1,000,000
• Natural persons with individual income more than $200,000 in each of the two most recent years, or joint income more than $300,000
• Trusts, with total assets more than $5,000,000
• Entities in which all the equity owners are accredited investors themselves
• Natural persons who hold one or more of the following accreditations: (i) Licensed General Securities Representative (Series 7); (ii) Licensed Investment Adviser Representative (Series 65); and (iii) Licensed Private Securities Offerings Representative (Series 82)
• Natural persons who are “knowledgeable employees” of the issuer of the securities being offered or sold where the issuer would be an investment company
• Any “family office” with assets under management more than $5,000,000, not formed for the specific purpose of acquiring the securities offered, and directed by an experienced professional
• Any “family client” of a family office and whose prospective investment in the issuer is directed by such family office

These examples illustrate the definition of an accredited investor by showing the different types of investors who are allowed to purchase unregistered securities. For example, banks, investment advisors, and insurance companies are all considered accredited investors because of their special circumstances or qualities. Similarly, natural persons with high net worth or income are also considered accredited investors because of their financial status.