SEC Adopts Major Amendment To Definition Of “Accredited Investor”
On August 26, 2020, the SEC adopted a major amendment to the definition of “Accredited Investor” by adding new categories and clarifying previous thresholds under which individuals and entities could qualify. This is good news for private investment funds as such a move effectively broadens the pool of available capital with more people qualifying as Accredited.
The summary of the amendment is as follows:
- Individuals with certain professional certifications, designations, or credentials now qualify as Accredited. For now, this is chiefly financial licensed professionals (Series 7, Series 65, and Series 82 licenses), but the SEC reserves the right to expand the list of acceptable certification
- “Knowledgeable employees” with respect to investments in a private fund now qualify as Accredited
- Clarification that LLC’s with $5M in assets, along with certain state-registered investment advisors and rural business investment companies, may qualify as Accredited
- Family Offices with at least $5M in AUM (Assets Under Management) may now qualify as Accredited
- For individuals, the term “spousal equivalent” has been added so that spousal equivalents may pool their finances for the purposes of qualifying as Accredited
- Indian tribes, governmental bodies, and certain foreign entities with more than $5M may qualify as Accredited
For more information, see the official press release by the SEC, here.
Wondering how this may affect your syndication deal, private equity fund, or venture deal? Contact your attorney today or get in touch with us for a free consult.
Adnan Merchant is a partner at M&W Law, PLLC, a Dallas-based business law firm. He practices corporate and securities law and focuses on private fund structuring and investment deals, including syndication deals and private equity/venture capital deals.
Disclaimer: This article should not be taken as legal advice, as each situation can be unique. Please consult your attorney prior to taking any steps. If you do not have an attorney, please feel free to give us a call to set up a consultation.
