Which of the following is a valid accredited investor criterion?

• A. An employee benefit plan with the plan assets over $5 million
• B. An individual income of $50,000
• C. A charitable organization with assets of $1 million
• D. A natural person with assets less than $500,000

Answer: (A)

Accredited investor status is based on thresholds that indicate a party can bear the risks of private placements and has the sophistication to evaluate them. An employee benefit plan with plan assets of at least $5 million qualifies because such plans are large and professionally managed, meeting the minimum asset size that SEC rules recognize as capable of assessing risk.

The other options don’t meet the criteria: an individual's income of $50,000 fails the income tests (typically at least $200,000 per year, or $300,000 with a spouse, for two years). A charitable organization with $1 million in assets falls short of the $5 million asset threshold that applies to charities. A natural person with assets under $500,000 does not meet the net worth threshold (usually $1 million excluding primary residence) or the income criteria.