Blogs

The SEC's Investor Advisory Committee Ponders Change to Accredited Investor Definition

10.09.14

On Thursday, October 9, the Investor Advisory Committee of the Securities and Exchange Commission will meet to discuss whether to recommend a change to the definition of "accredited investor." This definition has historically played a central role in determining whether an offering of securities qualifies for the private offering exemption established by SEC regulation. Any potential changes to this definition could affect a company's ability to raise capital in the private markets.

The Securities Act of 1933 provides an exemption from the registration and disclosure requirements for securities offerings not involving any public offering. SEC regulations over the last 50 years have clarified the means by which companies can offer securities without triggering these registration and disclosure requirements. The vast majority of private offerings today are conducted in reliance on Rule 506 of Regulation D, which allows for sales to an unlimited number of accredited investors without the need to register the offering. The rationale is that persons deemed to be accredited investors are sufficiently sophisticated to understand the risks inherent in any private offering, have the means to bear the economic risks associated with a purchase, and are able to negotiate with the issuer to obtain information about the issuer and the offering. For an individual to qualify as an accredited investor under the current definition, which was originally adopted in 1982, such person must have a net worth exceeding $1 million (excluding his primary residence) or individual income of at least $200,000 (or $300,000 with her spouse). Many investors and observers argue that these net worth and income thresholds are no longer relevant since they do not account for the last 30 years of inflation.

The Investor Advisory Committee previously discussed changes to this definition in July 2014, but could not agree on a recommendation. It remains to be seen whether the Committee will recommend modification of the net worth and income thresholds or more comprehensive changes - but it appears that recommended changes are in the works.

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

Search Tips:

You may use the wildcard symbol (*) as a root expander.  A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.

Entering two terms together in a search field will behave as though an "OR" is being used.  For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.

Operators

AND and OR may be used in a search.  Note: they must be capitalized, e.g., "Project AND Finance." 

The + and - sign operators may be used.  The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".

To perform an exact phrase search, surround your search phrase with quotation marks.  For example, "Project Finance".

Searches are not case sensitive.

back to top