On August 26, the Securities and Exchange Commission adopted amendments to the definitions of “accredited investor” in Rule 501(a) and “qualified institutional buyer” in Rule 144A under the Securities Act of 1933 (Securities Act). The amendments expand the definition of accredited investor, a principal test to determine eligibility for participation in private capital markets, even if they do not meet specified income and net worth tests. Amendments to the qualified institutional buyer definition similarly expand the list of eligible entities under that definition. The amendments were adopted generally as proposed with no significant changes. The proposed amendments were previously covered in the December 20, 2019 edition of the Corporate & Financial Weekly Digest.
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SEC Announces Proposed Amendments to the Definitions of “Accredited Investor” and “Qualified Institutional Buyer”
On December 18, the Securities and Exchange Commission voted to propose amendments (the Proposal) to the definition of “accredited investor” for purposes of private placements under Regulation D and the definition of “qualified institutional buyer” in Rule 144A under the Securities Act of 1933. The Proposal is intended to update and improve the definitions of those terms in order to more effectively identify both institutional and individual investors with the sophistication to participate in private capital markets transactions. In the SEC’s press release announcing the Proposal, 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.” As highlighted in the fact sheet included in the press release, the Proposal would, among other things:
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