- The United States Securities and Exchange Commission just adopted changes to the definition of the “accredited investor” term.
- Before, specific investors that do not meet the needed income tests have been turned down the chance to invest in the SECs wide-ranged private markets.
The United States Securities and Exchange Commission (SEC) just adopted changes to the definition of the “accredited investor” term.
Before, specific investors that do not meet the needed income tests have been turned down the chance to invest in the SECs numerous layered and wide-ranged private markets. This came despite people’s financial position.
Jay Clayton, chairman of the US SEC, said the following:
“Today’s amendments are the product of years of effort by the Commission and its staff to consider and analyze approaches to revising the accredited investor definition.”
The changes in this update improve the definition to more identify institutional and individual investors in a much more efficient way. Especially those that have the knowledge and skills to get involved with these markets.
The chairman continues:
“For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth, but also based on established, clear measures of financial sophistication. I am also pleased that we have expanded and updated the list of entities, including tribal governments and other organizations, that may qualify to participate in certain private offerings.”
With these changes, investors will be able to qualify as accredited investors based on defined measures of professional knowledge or experience.
Furthermore, these amendments will also expand the list of entities that could meet the requirements for accredited investors, this could include allowing any body that can meet an investment test to continue.
A few of the amendments, as written by the SEC in their announcement, reads as follows:
- “add a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution, which the Commission may designate from time to time by order. In conjunction with the adoption of the amendments, the Commission designated by order holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons. This approach provides the Commission with flexibility to reevaluate or add certifications, designations, or credentials in the future. Members of the public may wish to propose for the Commission’s consideration additional certifications, designations or credentials that satisfy the attributes set out in the new rule;
- include as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund;
- add “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act; and
- add the term “spousal equivalent” to the accredited investor definition, so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors.”
Full story here.