December 26, 2019
On December 18, 2019, the SEC proposed amendments to the definitions of both “accredited investor” (under Regulation D) and “qualified institutional buyer” (“QIB”) (Rule 144A) under the Securities Act of 1933.
In announcing the proposed amendments, SEC Chairman Jay Clayton noted that, “The current test for individual accredited investor status takes a binary approach to who does and does not qualify based only [on] a person’s income or net worth. Modernization of this approach is long overdue.” The proposed revisions reflected a mindfulness by the SEC that “an overly broad definition could potentially undermine important investor protections and reduce public confidence in this vital market, [and that] an unnecessarily narrow definition could limit investor access to investment opportunities where there may be adequate investor protection given factors such as that investor’s financial sophistication, net worth, knowledge and available to investors in registered securities offerings.” The current net-income and net-worth standards would remain unchanged and, unlike Regulation A offerings, there were no proposed limits on the amount that a person could invest in either Regulation D or Rule 144A offerings.
The SEC’s fact sheet highlighted the following aspects of the proposed amendments:
The SEC is soliciting comments on the Proposal for a period of 60 days after publication in the Federal Register.
 An exemption from registration that allows offerings up to $50 million but that, under certain circumstances, limits the amount that that an individual unaccredited investor can invest to no more than 10% of the greater of the person’s, alone or together with a spouse, annual income or net worth (excluding the value of the person’s primary residence and any loans secured by the residence (up to the value of the residence)).
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