SEC Proposes Revisions to “Accredited Investor” and “Qualified Institutional Buyer”

Among the key thresholds under Regulation D and Rule144A for eligibility for investing in private securities offerings are the definitions of “accredited investor” and “qualified institutional buyer”.  In mid-December of 2019, the Securities and Exchange Commission approved, by a vote of 3-2, a proposal to revise these definitions.  The current categories and financial thresholds remain largely unchanged, but new categories would be added. In terms of accredited investors, new categories would cover, for example, certain persons who hold securities trading and similar licenses, certain investors who are considered “knowledgeable persons” as employees of a fund under Rule 3(c)(5) of the Investment Company Act or 1940, family offices with at least $5 million in assets under management and any entity not formed for the specific purpose of acquiring the securities offered with at least $5 million in investments.  The revisions would broaden the ability of companies to use the rules to raise capital.  Public comments are due by mid-February.