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SEC’s Expanded Definition of “Accredited Investor”

And Related Amendments Creates New Opportunities for Investors and Issuers

 

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On Wednesday, August 26, 2020, the Securities and Exchange Commission (the “SEC”) changed the investment landscape as we know it by modestly relaxing the eligibility rules for investment in private offerings.  The Adopting Release publishing and explaining the amendments (the “Amendments”), approved by a 3-2 vote of the Commission, follows years of policy analysis and public input.  


Other important changes have been made to the SEC’s private offering rules in the 38-year history of Regulation D.  This is the first time, however, that the SEC has provided by rule that “accredited investor” status can be achieved by virtue of knowledge rather than income, wealth, ownership or position.  Market participants who had hungered for more relief will feel the Amendments are “too little” to address the need.  The Commission, though, is characterizing the Amendments as but one part of a broader initiative to simplify, harmonize and improve the exempt offering framework to promote capital formation while maintaining investor protection. In other words, further relief may be on the way.


The Amendments will be effective 60 days after publication in the Federal Register; i.e., in early November 2020.  Below, we summarize core aspects of the Amendments and provide some insights on the implications of the Amendments.


Practical Take-Aways


We highlight the following practical take-aways for prompt consideration by all investors and issuers:


  •     Subscription Documents:  Subscription documents and questionnaires for ongoing offerings and offerings preparing to launch should be revised to incorporate the substance of the Amendments.
  •    Re-Evaluation of “Accredited Investor” Status:  Investors who previously did not qualify as “accredited investors” under existing criteria should contact their professional advisors to determine whether they now qualify as “accredited investors.”

 Full Article

Source: JD Supra

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