By Robert R. Boeche II, Esq., Partner and Andrew Steiger, Law Clerk of Shustak Reynolds & Partners, P.C. posted on Tuesday, September 15, 2020.
Location: San Diego, California
Phone: (619) 696-9500 (Ext. 122)
Direct: (619) 546-5502
Email: [email protected]
On August 26, 2020, the Securities and Exchange Commission (SEC) adopted updates to the definition of “accredited investor” under the Securities Act of 1933. Historically, only investors who met specific income or net worth requirements qualified for the accredited investor designation, which permits participation in private markets. Now, an individual can also qualify as an accredited investor based on established, clear measures of financial sophistication. Also, certain entity types that were previously excluded from the designation are now allowed.
The rules update formally codified positions long held by the SEC. It is now clear that Limited Liability Companies with assets in excess of $5 million may be accredited investors. Registered investment advisers, exempt reporting advisors, and rural business investment companies may also qualify.
These changes are examples of the SEC’s ongoing efforts to improve the exempt offering regulatory framework. The Commission characterizes the modernization effort as the “harmonization” of hodgepodge securities offering exemptions. By updating the framework and reworking definitions, the SEC seeks to expand investment opportunities and promote capital formation without compromising investor protections.
Highlights of the final rule amending the definitions include:
These changes become effective no sooner than late October 2020.
We greatly appreciate Andrew Steiger's contribution to our firm! Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters. Please direct any questions to partner Robert R. Boeche II, Esq. and contact us today for a confidential, complimentary consultation.