Accredited investor: Difference between revisions
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The [[SEC]] has considered a change to the definition of "accredited investor" to create a new class of potential investors: "accredited natural persons". The proposed changes would stipulate that an "accredited natural person" must be both "accredited investor" under the existing standards and also own not less than $2.5 million in investments (as currently defined in the Investment Company Act for purposes of the Section 3(c)(7) exemption) on the date an investment is made.<ref name=hedge>{{cite web|last=Dallett |first=Matthew |title=SEC Proposes New Anti-Fraud Rule and New Accredited Investor Definition for Private Investment Vehicles |url=http://www.edwardswildman.com/insights/PublicationDetail.aspx?publication=2661 |deadurl=yes |archiveurl=https://web.archive.org/web/20131219222134/http://www.edwardswildman.com/insights/PublicationDetail.aspx?publication=2661 |archivedate=2013-12-19 }}</ref> | The [[SEC]] has considered a change to the definition of "accredited investor" to create a new class of potential investors: "accredited natural persons". The proposed changes would stipulate that an "accredited natural person" must be both "accredited investor" under the existing standards and also own not less than $2.5 million in investments (as currently defined in the Investment Company Act for purposes of the Section 3(c)(7) exemption) on the date an investment is made.<ref name=hedge>{{cite web|last=Dallett |first=Matthew |title=SEC Proposes New Anti-Fraud Rule and New Accredited Investor Definition for Private Investment Vehicles |url=http://www.edwardswildman.com/insights/PublicationDetail.aspx?publication=2661 |deadurl=yes |archiveurl=https://web.archive.org/web/20131219222134/http://www.edwardswildman.com/insights/PublicationDetail.aspx?publication=2661 |archivedate=2013-12-19 }}</ref> | ||
The $2.5 million test will be periodically adjusted for inflation.<ref name=hedge /> | The $2.5 million test will be periodically adjusted for inflation.<ref name=hedge /> | ||
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{{c|US Securities Regulation}} | |||
Latest revision as of 08:42, 15 September 2017
The term "accredited investor" is defined in Rule 501 of Regulation D issued by the Securities and Exchange Commission (we think this is under the Securities Act of 1933) (SEC) as:
- a bank, insurance company, registered investment company, business development company, or small business investment company;
- an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
- a charitable organization, corporation, or partnership with assets exceeding $5 million;
- a director, executive officer, or general partner of the company selling the securities;
- a business in which all the equity owners are accredited investors;
- a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, or has assets under management of $1 million or above, excluding the value of the individual's primary residence;[1][2]
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;[3] or
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes."[4]
Proposed new accredited investor class for hedge funds
The SEC has considered a change to the definition of "accredited investor" to create a new class of potential investors: "accredited natural persons". The proposed changes would stipulate that an "accredited natural person" must be both "accredited investor" under the existing standards and also own not less than $2.5 million in investments (as currently defined in the Investment Company Act for purposes of the Section 3(c)(7) exemption) on the date an investment is made.[5] The $2.5 million test will be periodically adjusted for inflation.[5]