SEC ADOPTS RULES MODIFYING THE NET WORTH STANDARD FOR ACCREDITED INVESTORS
By Jeffrey T. Hartlin and Samantha H. Eldredge
On December 21, 2011, the Securities and Exchange Commission (SEC) adopted amendments to the definition of accredited investor under Regulation D of the Securities Act of 1933, as amended (Securities Act), to implement the requirements of Section 413(a) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The Dodd-Frank Act, along with the SECs amendments, exclude the value of a persons primary residence in determining whether the person qualifies as an accredited investor under Regulation D on the basis of having a net worth of more than $1 million for purposes of participating in certain securities offerings that are not registered under the Securities Act. As a result, the Dodd-Frank Act and recent amendments to Regulation D have narrowed one of the primary means historically used by individuals to qualify as accredited investors in order to participate in private placements of securities. The SEC amendments will go into effect 60 days after publication in the Federal Register.