Quick Answer
Regulation D splits accredited investor entities in two: financial institutions and issuer insiders qualify by status alone, while six others, employee benefit plans, 501(c)(3) organizations, trusts, family offices, and a catch-all row, generally clear a $5,000,000 threshold. A plan under the Employee Retirement Income Security Act (ERISA) can instead qualify by fiduciary status or self-direction.
An entity's accredited status determines whether it can buy into a private offering without the disclosure protections a registered offering provides. The categories split into two groups: one where size never matters, and one where a dollar threshold does most of the work, though two of those rows also need a sophisticated person and an ERISA plan has routes carrying no dollar test.
Which Entities Qualify by Status Alone?
These entities are accredited investors regardless of their asset size, because their status already signals sophistication or regulatory oversight:
- Any bank or savings and loan association, acting in its own capacity or as a fiduciary
- A broker-dealer registered under the Securities Exchange Act
- An investment adviser registered with the Securities and Exchange Commission (SEC) or a state, or one relying on the private-fund adviser exemption
- An insurance company
- A registered investment company or a business development company (BDC), a closed-end fund that invests in and provides managerial help to smaller companies
- A Small Business Investment Company (SBIC) or a Rural Business Investment Company (RBIC)
- A private business development company as defined under the Investment Advisers Act
- A director, executive officer, or general partner of the issuer, or a director, executive officer, or general partner of the issuer's general partner
Think of it this way: Every entity on this list is either already regulated (banks, broker-dealers, registered advisers, insurance companies, registered funds) or already inside the deal (an issuer's own director or general partner). Regulators do not need a dollar test to know these parties can evaluate the risk.
Exam Tip: Gotchas
- A common trap is assuming every entity needs to clear a dollar test to qualify. The eight status-based entities above never do; only the six categories in the next table carry a threshold.
Which Entities Are Tested on a Dollar Threshold?
Six other entity types have no status that by itself signals sophistication, so Regulation D tests them further. Most must clear a $5,000,000 asset, investment, or assets-under-management threshold.
A trust and a family office must also have a sophisticated person direct the purchase, and an ERISA plan can qualify instead through a bank, savings and loan, insurance company, or registered investment adviser fiduciary, or through self-direction solely by accredited investors:
| Category | Threshold |
|---|---|
| State or municipal employee benefit plan | Total plan assets exceed $5,000,000 |
| Employee benefit plan under the Employee Retirement Income Security Act (ERISA) | Fiduciary is a bank, savings and loan, insurance company, or registered investment adviser, OR plan assets exceed $5,000,000, OR (if self-directed) investment decisions are made solely by accredited investors |
| A 501(c)(3) organization (a charity, and also a religious, educational, or scientific nonprofit), corporation, business trust, partnership, or LLC not formed to acquire the securities offered | Total assets exceed $5,000,000 |
| A trust not formed to acquire the securities offered | Total assets exceed $5,000,000, and the purchase is directed by a sophisticated person |
| A family office, as defined under the Investment Advisers Act | Assets under management exceed $5,000,000, the office was not formed to acquire the securities offered, and a person with sufficient financial knowledge and experience directs the investment |
| Any other entity type not otherwise listed, not formed to acquire the securities offered | Owns investments (not merely total assets) exceeding $5,000,000 |
Exam Tip: Gotchas
- Four of these six rows share the same condition: the entity cannot be formed for the specific purpose of buying into that offering. A special-purpose vehicle assembled to pool money for one deal fails those four rows even if its assets clear $5,000,000.
- The two employee benefit plan rows are the exception. They carry no purpose condition at all, so a plan formed for reasons unrelated to this deal, or even one assembled around it, is tested only on its fiduciary or its asset size.
- Watch for the "last other entity" row: it tests investments owned, not total assets. Property the entity uses for personal purposes or as its own place of business normally does not count, so a holding company whose $6,000,000 sits in its operating premises fails that row.
- Real estate has one carve-back. An owner primarily in the business of investing in, trading, or developing real estate may have its business property treated as held for investment.
How Does the Look-Through Rule Work for Entities?
Two categories qualify by looking past the entity to the people or entities that own it, rather than testing the entity's own balance sheet:
- An entity in which every equity owner is independently an accredited investor
- A family client of a family office that itself qualifies as an accredited investor under the family office row above, where that same family office is the one directing the family client's investment in this offering
Think of it this way: An entity with no assets of its own can still be accredited if you trace ownership all the way through and every owner you find is accredited on their own. The entity is a pass-through, not a balance sheet to test.
What Should You Check on Exam Day?
- Confirm whether a fact pattern tests a status-based entity (no dollar test at all) or a threshold entity ($5,000,000 test), and remember that an ERISA plan can qualify through its fiduciary or through self-direction instead.
- Check whether the entity was formed specifically to buy into this offering. That kills four of the six threshold categories but never the two employee benefit plan rows.
- Distinguish "total assets" (most threshold rows) from "investments" (the catch-all row) and "assets under management" (the family office row), since real estate and operating assets can count differently under each.
- Confirm a look-through claim by tracing every equity owner, not just the largest one.