Final SEC Rule Updating Accredited Investor Definition to Become Effective in February
Posted in on January 10, 2012
On December 29, 2011, pursuant to a requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC issued a final rule updating the “accredited investor” standard under the Regulation D of the Securities Act of 1933. The new “accredited investor” individual net worth standard under Rule 501(a) excludes the equity value of the investor's primary residence from the $1 million net worth threshold. This final rule is effective on February 27, 2012. The full text of the final Rule can be found on the SEC web page (http://www.sec.gov/rules/final/2011/33-9287.pdf).
Many Regulation D sponsors have already updated their offering documents to take into account this revision, but determining whether an investor is accredited is an important issue because most Regulation D private offerings are promoted as being open only to accredited investors, and this change to Rule 501 necessarily reduces the universe of accredited investors.