SEC Modernizes the Accredited Investor Definition

Yesterday, the Securities and Exchange Commission adopted amendments to the “accredited investor” definition, which were proposed in December 2019.

The “accredited investor” definition determines who is eligible to participate in US private capital markets. In particular, while everyone can participate in Regulation CF offerings featured on Ignite Social Impact, Regulation D offerings (Title II-Rule 506c) available through other online platforms are only accessible to accredited investors.

The amendments revise Rule 501(a), Rule 215, and Rule 144A of the Securities Act, and a very interesting point is that income or net worth are no longer the only criteria to qualify as an accredited investor. Defined measures of professional knowledge, experience or certifications will now also be taken into account. For instance, holders in good standing of the Series 7, Series 65, and Series 82 FINRA licenses will qualify as accredited investors, and “knowledgeable employees” of private investment funds will qualify too.

The amendments also expand the list of entities that may qualify as accredited investors, including by allowing any entity that meets an investments test to qualify. These include: limited liability companies, family offices, governmental bodies, funds, and entities organized under the laws of foreign countries that own or manage “investments” with at least $5 million in asset.

Read the full SEC press release here

By |2020-08-27T15:57:17+00:00August 27th, 2020|Finance, Fundraising|0 Comments