finance banking sec
How was the $200,000 minimum income for accredited investors decided?
<p>The SEC has a rule that restricts the definition of an <strong>accredited investor</strong> to a person who has income in excess of $200,000.</p>

<blockquote>
  <p>(6) Any natural person who had an individual income in excess of
  $200,000 in each of the two most recent years or joint income with
  that person's spouse in excess of $300,000 in each of those years and
  has a reasonable expectation of reaching the same income level in the
  current year;</p>
  
  <p><a href="http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&amp;SID=8edfd12967d69c024485029d968ee737&amp;r=SECTION&amp;n=17y3.0.1.1.12.0.46.176" rel="nofollow">Title 17 → Chapter II → Part 230 → §230.501</a> </p>
</blockquote>

<p>How was this number decided, and what is the reasoning behind this decision? </p>

<p>It's essentially a legally enshrined incentive for high net worth investors to supply capital, which is consistent with the other entities that qualify in § 230.501.  It tends to come with increased access to riskier offerings, where the risk ensues from exempted registration.</p>

<p>While nominal dollar thresholds typically get eroded away by inflation, they needed a line in the sand to represent financial sophistication.</p>

<p>Speculation: I suspect the initial number was a ballpark attempt to approximate the point at which individuals (at that time) tended to be involved in more complex projects (<em>e.g.</em> certain hedges and ventures).</p>

<p>put in the vernacular, an "accredited investor" is a so-called "sophisticated" investor who does not need to be protected from their own stupidity or from rapacious consultants who prey on passive market participants (i.e. 401(k) fundies.)</p>

<p>The number chosen IS essentially arbitrary.  It's essentially 5x the median US income.</p>
