/>iOn November 14, Securities and Exchange Commission Chair Mary Jo White delivered a letter to Representative Scott Garrett, Chairman of the House of Representatives Subcommittee on Capital Markets and Government-Sponsored Enterprises for the House Financial Services Committee, in which she answered a number of Representative Garrett’s questions regarding the status of the SEC’s review of the definition of “accredited investor” under Rule 501(a) promulgated under the Securities Act of 1933 (Securities Act). The SEC’s review of the accredited investor definition with respect to individuals was mandated by the Dodd–Frank Wall Street Reform and Consumer Protection Act and is currently underway. Any changes to the definition of accredited investor will be closely watched, because such changes will impact which individuals may participate in private offerings of securities conducted under Rule 506 promulgated under the Securities Act, including under new subsection (c), which allows for general solicitation and general advertising.
Although Chairwoman White indicated that the SEC staff’s review of the accredited investor definition was not complete, she noted that that SEC’s staff is examining whether:
-
individuals with certain professional accreditations, including certified public accountants and chartered financial analysts, and experienced financial professionals, including registered investment advisers, brokers, consultants, traders, portfolio managers, analysts, compliance staff, legal counsel and regulators, should be included as accredited investors regardless of whether they satisfy the income and net worth tests;
-
individuals with certain educational backgrounds, including finance, accounting or economics, should qualify as accredited investors based solely on such backgrounds;
-
expanding the pool of accredited investors would increase liquidity for private market investments;
-
ordinary investors relying on the guidance of a registered investment adviser or a qualified broker should be permitted to participate in a Rule 506 offering;
-
diminishing the pool of accredited investors would harm US GDP; and
-
it is appropriate for the SEC to continue to utilize the current net worth and income tests when determining accredited investor status.
Under the Dodd–Frank Act, the SEC is required to complete its review of the accredited investor definition not later than July 21, 2014, the fourth anniversary of President Obama’s signing the Dodd-Frank Act into law.
