SEC Redefining Who Is An "Accredited Investor" (8/27/20)
SEC Redefining Who Is An "Accredited Investor"
The SEC has a new take on which investors should have access to the private markets. For decades, regulations have generally barred individual investors from participating in the nation's private markets unless they were wealthy enough to take on the risks of such opaque investments.
The new rules, championed by SEC chairman Jay Clayton, come out of a years-long debate about ways to help more Americans tap into the vast wealth creation spawned by the booming private markets at a time of dwindling opportunities in publicly traded stocks.
Industry observers weighed in quickly Wednesday with both applause and criticism after the SEC released its revised accredited investor definition. While not expanding the wealth thresholds, the agency did allow investors to qualify based on defined measures of professional knowledge, experience or certifications, including FINRA licenses, in addition to the existing tests for income or net worth.
"The amendments are intended to update and improve the definition to identify more effectively investors that have sufficient knowledge and expertise to participate in investment opportunities that do not have the rigorous disclosure and procedural requirements, and related investor protections, provided by registration under the Securities Act of 1933."
"Specifically, the amendments add new categories of natural persons that may qualify as accredited investors
• based on certain professional certifications or designations or other credentials or
• their status as a private fund’s “knowledgeable employee,”
• expand the list of entities that may qualify as accredited investors,
• add entities owning $5 million in investments,
• add family offices with at least $5 million in assets under management and their family clients, and
• add the term “spousal equivalent” to the definition.
• We are also adopting amendments to the “qualified institutional buyer” definition in Rule 144A under the Securities Act to expand the list of entities that are eligible to qualify as qualified institutional buyers."
Even with the amendments to the definition of "accredited investor", the SEC said the changes aren't expected to add significantly to the pool of existing accredited investors, and that the amount of capital from newly eligible investors would have "minimal effects" on the private markets.
Your Link:
Click Here for the Final Rule (Amending the "Accredited Investor" Definition
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Stay strong. Stay safe. Stay in touch.
Warm regards,
Paige
Paige W. Pierce
President & CCO
McLaughlin Ryder Investments, Inc.
(801) 949-5577 c
ppierce@mclaughlinryder.com