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In Canada, an accredited investor is a person or entity that is considered to be financially sophisticated and able to bear the economic risks of investing in unregistered securities. Accredited investors typically include institutions such as banks and insurance companies, as well as individuals who meet specific criteria.
Qualifications of an Accredited Investor
To qualify as an accredited investor, an individual must meet one of the following criteria:
- Have net assets of at least $1,000,000, not including the value of their primary residence;
- Earn a minimum of $200,000 in net income before taxes in each of the two most recent calendar years, or a joint net income with their spouse of at least $300,000 in each of the two most recent calendar years, with an expectation of achieving the same level of income in the current calendar year; or
- Be a director, executive officer, or control person of the issuer of the securities being offered
Advantages of Being an Accredited Investor
Being an accredited investor implies possessing a higher level of financial expertise and the ability to bear the risks of investing in unregistered securities. This enables them to invest in specific types of securities that are not registered with securities regulators and do not adhere to the same disclosure requirements as other investments. It is important to note, however, that investing in unregistered securities can be risky and may not be appropriate for all investors. Therefore, accredited investors must carefully evaluate the risks of these investments before making a decision. Seeking professional advice from a financial advisor is highly recommended before making any investment decisions.
