On August 26, the SEC amended its rules under the Securities Act of 1933 to expand the definition of "accredited investor" used for determining eligibility to invest in certain securities offerings exempt from Securities Act registration. The amendments represent some of the most extensive changes to the definition since the SEC adopted the accreditation rule in 1982 as part of Regulation D under the Securities Act.
The amendments add new categories of natural persons and entities to the accredited investor definition and modestly enlarge the scope of some of the existing categories. Notably, the SEC has supplemented the income and net worth tests for accreditation of natural persons with a test for financial sophistication based on a person's professional certifications, designations, or other credentials, or the person's status as a "knowledgeable employee" of a private fund. The SEC also has expanded the list of entities that qualify as accredited investors to encompass entities owning in excess of US$5 million in "investments" and family offices having more than US$5 million in assets under management and their family clients. In addition, the SEC has expanded the definition of "qualified institutional buyer" in Rule 144A under the Securities Act to line up with the expanded accredited investor categories.
The amendments will become effective 60 days after they are published in the Federal Register.
The amended rules are discussed in the SEC's adopting release (No. 33-10824), which is available here.
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Authored by Alan Dye, Richard Parrino, and Kevin Greenslade
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