What is the new rule for accredited investors

New SEC rules for accredited investors make accreditation easier

Big changes to the definition of accredited investors. The SEC approved these changes on August 26, 2020. They become effective 60 days after publication in the Federal Register:

According to the SEC, the changes to the definition of the accredited investor in Rule 501 (a) are:

- Add a new category to the definition that allows individuals to qualify as Accredited Investors based on certain professional certifications, designations or credentials, including Series 7, 65 and 82 Licenses as Qualified Individuals. (The commission will reevaluate or add certifications, designations or certificates in the future.)

- include, as accredited investors with regard to investments in a private fund, natural persons who are “knowledgeable employees” of the fund;

Clarify that limited liability companies with assets of $ 5 million can be accredited investors and can add SEC and federally registered investment advisors, exempt reporting advisors, and rural corporation investment companies (RBICs);

- Added a new category for every facility, including Indian tribes, government agencies, funds, and agencies organized under the laws of foreign countries;

- Adding "Family Offices" with assets under management of at least US $ 5 million and their "Family Clients" as each term is defined in the Investment Advisers Act; and

- Add the term “spouse equivalent” to the definition of accredited investor so that spouse equivalents can pool their finances to qualify as accredited investors.


Article by Amy Wan, amywanlaw.com

Photo by Markus Spiske on Unsplash