US Securities and Exchange Commission (SEC) expands accredited investor definition

Abstract

Purpose To explain amendments to the definition of “accredited investor” approved by the SEC in August 2020 and to describe the impact of the changes. Design/methodology/approach Explains how the amendments expand the pool of qualified investors in various subsections of the definition, explains related amendments, and then discusses the implications of the changes. Findings The amendments, among other things: (i) permit natural persons to qualify as accredited investors based on certain professional credentials or, for investments in private funds, based on “knowledgeable employee” status”; (ii) add LLCs and other specified entity types to the list of potentially-qualifying entities, and add a “catch-all” category for unspecified entities (although with different quantitative standards); (iii) add the term “spousal equivalent” to the definition; and (iv) codify certain related staff interpretive positions. In addition, the amendments revise the definition of “qualified institutional buyer” to include additional entity types to avoid inconsistencies with the new accredited investor definition. Originality/value Expert analysis and guidance from experienced securities attorneys who counsel clients on all manner of SEC regulatory policy matters.