SEC High Net Worth Definition: Accredited, Qualified Client, Purchaser

The SEC’s high net worth definition is not a single number. Federal securities rules use three separate financial thresholds — accredited investor, qualified client, and qualified purchaser — and each one opens a different door. Accredited investor status requires more than $1 million in net worth or $200,000 in annual income. Qualified client status requires more than $2.2 million in net worth (rising to $2.7 million in 2026) or $1.1 million under a specific adviser’s management (rising to $1.4 million). Qualified purchaser status, the highest tier, requires at least $5 million in investments. Which label applies to you determines what you can buy and how your adviser can charge you.

Accredited Investor

Accredited investor is the threshold most people encounter first. It comes from Rule 501 of Regulation D under the Securities Act of 1933, and it controls who can put money into private securities offerings that skip the full SEC registration process: venture capital funds, private equity deals, hedge funds with limited investor pools, and startup fundraising rounds.¹

You can qualify two ways. The net worth test requires more than $1 million, individually or jointly with a spouse or spousal equivalent, excluding your primary residence. The income test requires more than $200,000 individually in each of the two most recent years with a reasonable expectation of the same in the current year, or $300,000 jointly with a spouse or spousal equivalent over the same period.²

These figures have not been adjusted for inflation since the income test was created in 1982 and the net worth test was last modified in 2010, so the bar is lower in real terms than it once was. As of 2026 the numbers remain unchanged.

Professional Credentials as an Alternative

Since 2020, the financial tests are not the only path. Holders of Series 7, Series 65, or Series 82 licenses in good standing qualify as accredited investors regardless of income or net worth. So do directors, executive officers, and general partners of the company issuing the securities, along with “knowledgeable employees” of a private fund.²

Qualified Client

Qualified client status solves a different problem. Under the Investment Advisers Act of 1940, registered investment advisers generally cannot charge performance-based fees — compensation that rises and falls with your portfolio gains. Rule 205-3 carves out an exception: if you meet the qualified client threshold, your adviser can charge those fees.³

Two tests are available. The net worth test requires more than $2.2 million immediately before entering the advisory contract. The assets-under-management test requires at least $1.1 million placed under that specific adviser’s management immediately after entering the contract. Both figures have been in effect since August 2021.⁴

2026 Inflation Adjustment

Unlike accredited investor thresholds, qualified client thresholds get mandatory inflation adjustments roughly every five years under the Dodd-Frank Act. The SEC published notice in March 2026 of its intent to raise the assets-under-management test from $1.1 million to $1.4 million and the net worth test from $2.2 million to $2.7 million. The new figures take effect 60 days after the SEC issues its final order.⁵

If you are close to the current thresholds, timing matters. An advisory contract signed before the effective date of the new order locks in the old numbers. One signed after requires the higher amounts.

Qualified Purchaser

Qualified purchaser sits at the top of the SEC’s financial hierarchy. An individual must own at least $5 million in investments. Institutions managing money on a discretionary basis must own $25 million.⁶

The payoff is access to funds organized under Section 3(c)(7) of the Investment Company Act. These funds can accept up to 2,000 investors without registering as investment companies, compared to the 100-investor cap on Section 3(c)(1) funds available to accredited investors. Many of the largest hedge funds and private equity vehicles are 3(c)(7) funds, meaning they stay closed unless you clear this bar.⁷

What Counts as “Investments”

The $5 million figure is not net worth. It counts only “investments” as defined by SEC rule. Qualifying items include securities, real estate held for investment purposes, commodity interests, physical commodities held for investment, cash and cash equivalents held for investment (including the cash surrender value of insurance policies), and assets in IRAs or similar retirement accounts where you direct the investments. Your primary residence, personal-use property, and business assets in a company you control generally do not count.⁸

How Net Worth Is Calculated

For both accredited investor and qualified client tests, net worth means total assets minus total liabilities, with one large carve-out. Your primary residence is excluded from the asset side, and the mortgage secured by it is excluded from the liability side, up to the home’s fair market value. The point is to measure investable wealth, not home equity.⁹

Underwater mortgages get tricky. If you owe more on your home than it is worth, the excess debt above the home’s value counts against your net worth. A $600,000 home with an $800,000 mortgage puts $200,000 on the liability side even though the home itself contributes nothing to the asset side.⁹

There is one more trap. If you increase the debt secured by your home within 60 days before buying securities, say by taking out a home equity line of credit, that new borrowing counts as a liability in the net worth calculation regardless of the home’s value. The exception is debt taken on to actually purchase the residence. The rule exists to stop people from borrowing against their home to inflate liquid assets right before an investment.⁹

Joint Calculations With a Spouse or Spousal Equivalent

You can combine assets and liabilities with a spouse or spousal equivalent for any of these tests. The SEC defines a spousal equivalent as a cohabitant in a relationship generally equivalent to that of a spouse. Joint net worth adds the aggregate assets and liabilities of both people; the assets do not need to be held jointly or titled jointly, and qualifying through the joint test does not require purchasing the securities jointly either.¹⁰

How Your Status Gets Verified

There is no SEC-issued certificate and no official registry. How rigorously your status is checked depends on the type of offering.

In a Rule 506(b) offering, the more common type where the fund does not publicly advertise, the issuer typically relies on a questionnaire and your self-certification. Independent verification is not required, though the issuer cannot sell to anyone they have reason to believe is lying.¹¹

Rule 506(c) offerings allow public advertising, and in exchange the issuer must take “reasonable steps” to verify every purchaser’s accredited status. The SEC recognizes several methods: reviewing two years of income documents such as W-2s, 1099s, Schedule K-1s, or Form 1040; reviewing recent asset and liability records (bank and brokerage statements, tax assessments, and a credit report from a nationwide consumer reporting agency, all dated within the prior three months) alongside your written representation; a written letter from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or CPA confirming they have verified your status; or a written representation that you still qualify if the issuer previously verified you, valid for up to five years.¹²

The third-party letter is the most common route because it hands the verification burden to a professional who already knows your finances. Expect to share tax returns, account statements, or both with whoever writes it.

Placing Yourself Among the Three

The thresholds stack. Meeting the accredited investor test lets you into private placements and 3(c)(1) funds capped at 100 investors. Meeting the qualified client test additionally lets you sign performance-fee arrangements with a registered adviser. Meeting the qualified purchaser test opens 3(c)(7) funds, which can hold up to 2,000 investors and include most of the largest private funds.

What each threshold measures matters as much as the number. Accredited investor and qualified client tests use net worth, which subtracts liabilities from assets and excludes your home. The qualified purchaser test counts only “investments,” which excludes your home and most personal property but includes retirement accounts you direct and real estate held for investment. Someone with $6 million in net worth concentrated in a business they run might clear the accredited investor and qualified client bars while falling short of qualified purchaser, because business equity in a company you control does not count as investments under the SEC’s definition.

1
eCFR. 17 CFR Part 230 – Regulation D Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933
2
U.S. Securities and Exchange Commission. Accredited Investors
3
eCFR. 17 CFR 275.205-3 – Exemption From the Compensation Prohibition of Section 205(a)(1) for Investment Advisers
4
SEC.gov. Inflation Adjustments of Qualified Client Thresholds – Fact Sheet
5
Federal Register. Performance-Based Investment Advisory Fees
6
Legal Information Institute. Definition: Qualified Purchaser From 15 USC 80a-2(a)(51)
7
Office of the Law Revision Counsel. 15 USC 80a-3 – Definition of Investment Company
8
eCFR. 17 CFR 270.2a51-1 – Definition of Investments for Purposes of Section 2(a)(51) of the Act
9
U.S. Securities and Exchange Commission. Accredited Investor Net Worth Standard
10
eCFR. 17 CFR 230.501 – Definitions and Terms Used in Regulation D
11
U.S. Securities and Exchange Commission. Private Placements – Rule 506(b)
12
U.S. Securities and Exchange Commission. Assessing Accredited Investors Under Regulation D