United States

SEC amends definition of “accredited investor”


The SEC recently issued a final rule, Amending the “Accredited Investor” Definition, which adds new categories of qualifying natural persons and entities and makes certain other modifications to the existing definition of “accredited investor” in the SEC’s rules. In particular, the amendments to the “accredited investor” definition:

  • Add a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials
  • With respect to investments in a private fund, add a new category based on the person’s status as a “knowledgeable employee” of the fund
  • Clarify that limited liability companies with total assets in excess of $5 million may be accredited investors
  • Add SEC- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies (RBICs) to the list of entities that may qualify as accredited investors
  • Add a new category for any entity, including Indian tribes, governmental bodies, funds and entities organized under the laws of foreign countries, that owns “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered
  • Add “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act
  • Add the term “spousal equivalent” to the accredited investor definition so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors

The SEC also issued amendments to the “qualified institutional buyer” definition in Rule 144A to include limited liability companies and RBICs if they meet the $100 million in securities owned and invested threshold in the definition. The amendments also add a “catch-all” category that permits institutional accredited investors under Rule 501(a), of an entity type not already included in the qualified institutional buyer definition, to qualify as qualified institutional buyers when they satisfy the $100 million threshold.

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