Articles Tagged with Accredited Investor

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An expanded universe of individuals and entities will be able to participate as “accredited investors” in securities offerings as a result of recent SEC rulemaking.

TAKEAWAYS

  • The SEC has expanded its definition of “Accredited Investor” to additional individuals and entities, including individuals with certain professional certifications and knowledgeable employees of private funds.
  • The amendments may provide additional regulatory certainty for issuers, investors and counsel.

On August 26, 2020, the Securities and Exchange Commission (the SEC) adopted amendments to the definition of “accredited investor” in Rule 501(a) of Regulation D under the Securities Act of 1933 (the Amendments). The Amendments, which will become effective 60 days after they are published in the Federal Register, expand the pool of individuals and entities that qualify as accredited investors. The definition of accredited investor is relevant, among other things, to the operation of Rule 506 of Regulation D, which is a safe harbor under Section 4(a)(2) of the Securities Act. Rule 506 is the most commonly-used exemption for private offerings, accounting for the vast majority of the trillions of dollars raised through unregistered offerings every year. Unregistered, private offerings of securities have supplanted public offerings as the dominant form of capital-raising in the United States. Since regulatory requirements are much greater for offerings that include non-accredited investors, an overwhelming majority of Rule 506 offerings are offered only to accredited investors.

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Read this article and additional Pillsbury publications at Pillsbury Insights.

More of this will be covered at an ALI CLE webinar, sponsored by Pillsbury, later this month that focuses on Regulation D Offerings and Private Placements.  To find out more about this webinar and to register, please visit https://www.ali-cle.org/course/Regulation-D-Offerings-Private-Placements-2020-VCCP0922

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China imposes controls on the inflow and outflow of foreign exchange. Given the involvement of State Administration of Foreign Exchange and various other governmental agencies in the process, repatriating funds from China can be a trap for the unwary. Foreign investors should familiarize themselves with the approval requirements and procedures.

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The Securities and Exchange Commission has published its schedule for adopting rules to implement the Dodd-Frank Act. The proposed timetable for adopting rules related to the oversight of investment advisers and exempt offerings is as follows:

October – December 2010

  • §§404 and 406: Propose (jointly with the CFTC for dual-registered investment advisers) rules to implement reporting obligations on investment advisers related to the assessment of systemic risk
  • §§407 and 408: Propose rules implementing the exemptions from registration for advisers to venture capital firms and for certain advisers to private funds
  • §409: Propose rules defining “family office”
  • §410: Propose rules and changes to forms to implement the transition of mid-sized investment advisers (between $25 and $100 million in assets under management) from SEC to State regulation, as provided in the Act
  • §418: Propose rules to adjust the threshold for “qualified client”
  • §413: Propose rules to revise the “accredited investor” standard
  • §926: Propose rules disqualifying the offer or sale of securities in certain exempt offerings by certain felons and others similarly situated

January – March 2011

  • §913: Report to Congress regarding the study of the obligations of brokers, dealers and investment advisers
  • §914: Report to Congress regarding the need for enhanced resources for investment adviser examinations and enforcement
  • §919B: Complete study of ways to improve investor access to information about investment advisers and broker-dealers

April – July 2011

  • §§404 and 406: Adopt rules (jointly with the CFTC for dual-registered investment advisers) to implement reporting obligations on investment advisers related to the assessment of systemic risk
  • §§407 and 408: Adopt rules implementing the exemption from registration for advisers to venture capital firms and to certain advisers to private funds
  • §409: Adopt rules defining “family office”
  • §410: Adopt rules and form changes to implement the transition of mid-sized investment advisers (between $25 and $100 million in assets under management) from SEC to State regulation, as provided in the Act
  • §418: Adopt rules to adjust the threshold for “qualified client”
  • §413: Adopt rules to revise the “accredited investor” standard
  • §926: Adopt rules disqualifying the offer or sale of securities in certain exempt offerings by certain felons and others similarly situated
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The Dodd-Frank Wall Street Reform and Consumer Protection Act will significantly change the regulatory regime governing investment advisers, particularly investment advisers to private funds, such as hedge funds and private equity funds.  The primary purpose of the new rules and requirements is to “fill the regulatory gap,” by requiring advisers to private funds to register as investment advisers with the Securities and Exchange Commission or state securities regulators, unless an exemption applies, and provide information about their activities to the SEC. For a detailed discussion of the provisions of the Dodd-Frank Act applicable to advisers to private funds, please see our related Client Alert.