According to U.S. securities law, only accredited investors may invest in private equity, venture capital, hedge funds, and private placements. Regulation D, Rule 501 of the Securities Act of 1933 defines accredited investor as:
(a) an individual (or married couple) whose (joint) net worth exceeds $1 million, excluding the value of the primary residence; or
(b) an individual with income exceeding $200,000 in each of the two most recent years, or a married couple with joint income exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.
Some companies and Institutions (e.g., banks, insurance companies, employee benefit plans, trusts, and certain business entities) can also qualify as accredited investors, but the minimum-asset requirements are generally higher.
The SEC estimates that at least 8.7 million U.S. households, or 7.4% of all U.S. households, qualified as accredited investors in 2010, based on the net worth standard in the definition of “accredited investor.” See pages 100-102 of the Economic Analysis section of the Commission’s final rule disqualifying bad actors from participation in 506 offerings (available here).
A study conducted by the Spectrem Group (cited here) found that in 2011, there were 8.6 million households in the U.S. with net worth of at least $1 million, however, this figure includes the value of homes. In 2010, the Dodd-Frank Act redefined the accredited investor by adjusting for inflation, removing the inclusion of homes in calculating wealth and redefining the income and net worth requirements for a person to be considered ‘accredited’ by the SEC.
According to the most recent data released by the Internal Revenue Service, in 2009, “there were 3,924,489 individual income tax returns reporting [adjusted gross income] of $200,000 or more, and 3,975,288 returns with expanded income of $200,000 or more.” Since some subset of these households surely do not also have a net worth of at least $1 million, the number (which does not account for the inevitable fluctuations since 2009) would be [8.6 million] – (the number of households that no longer qualify because the primary residence cannot be included) plus [the number of households that do not qualify by asset value but which do qualify by income].
(Updated July 16, 2013)