SEC Proposes To Expand the Definition of an Accredited Investor

In an era where, according to the Wall Street Journal, an estimated $3.4 trillion dollars is sitting on the “sidelines”, the Securities and Exchange Commission (“SEC”) is proposing to expand the number of individuals that can invest in non-public securities and other restricted investment vehicles. To do this, the SEC has proposed to expand the definition of an “accredited investor,” opening the door for more money to funnel into these restricted offerings by expanding the number of individuals qualified to make such an investment.

Generally, the limits were implemented to protect those individuals not knowledgeable enough to invest in securities that are not subject to the disclosure rules of a public security. However, the definition of an accredited investor qualified to make such an investment hasn’t been updated in a number of years, leaving it outdated. The proposed expansion of the definition will incorporate new categories of “natural persons” and “entities,” as well as other investment related organizations. New categories of natural persons include professionals with certain designations, such as those licensed with their Series 7, 65, or 82. Similarly, those knowledgeable employees of private funds would qualify as an accredited investor. Other proposed new categories include certain limited liability companies, investment advisers, investment companies, and family offices.

The SEC proposed expanding of the definition of an accredited investor on December 18, 2019, and the proposal will be open for a 60 day comment period. The SEC is actively soliciting comments regarding every aspect of this rule change, including its overall economic impact. For many, this is a long awaited and desired change to the definition of accredited investor that could result in more capital moving off the “sidelines.”

VW Contributor: Alex Rainville
© 2019 Vandenack Weaver LLC
For more information, Contact Us

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s