Institutional Accredited Investors (IAIs) | Practical Law

Institutional Accredited Investors (IAIs) | Practical Law

Institutional Accredited Investors (IAIs)

Institutional Accredited Investors (IAIs)

Practical Law Glossary Item 1-382-3546 (Approx. 3 pages)

Glossary

Institutional Accredited Investors (IAIs)

For purposes of Rule 163B of the Securities Act, this term refers to those categories of accredited investors that are institutional (as opposed to individual) as defined and described in Rule 501(a)(1), (2), (3), (7), (8), (9), (12), and (13) of revised Regulation D of the Securities Act, which became effective on December 8, 2020.
Any institutional investor which falls within any of the following categories of accredited investor at the time of the sale of the securities to that investor:
  • Any bank; any savings and loan association, whether acting in its individual or fiduciary capacity; any registered broker or dealer; any registered investment adviser; any investment adviser relying on registration exemptions under Section 203(l) or (m) under the Investment Company Act of 1940 (ICA); any insurance company; any investment company registered under the ICA or a business development company as defined in Section 2(a)(48) of that act; any Small Business Investment Company licensed by the US Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act, any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of $5 million; or any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 where investment decisions are made by a plan fiduciary that is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5 million or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors. Rule 501(a)(1).
  • Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940. Rule 501(a)(2).
  • Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5 million. Rule 501(a)(3).
  • Any trust, with total assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii). Rule 501(a)(7).
  • Any entity in which all of the equity owners are accredited investors. Rule 501(a)(8)
  • Any entity of a type not listed in Rule 501(a), owning investments in excess of $5 million that is not formed for the specific purpose of acquiring the securities offered. Rule 501(a)(9).
  • Any "family office," as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (Advisers Act):
    • with assets under management in excess of $5 million;
    • that is not formed for the specific purpose of acquiring the securities offered; and
    • whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment. Rule 501(a)(12).
  • Any "family client," as defined in Rule 2020(a)(11)(G)-1 under the Advisers Act, of a family office meeting the requirements in paragraph (a)(1) of Rule 501 and whose prospective investment in the issuer is directed by such family office under Rule 501(a)(12)(ii). Rule 501(a)(13).
For purposes of private placements, the term has traditionally referred to those categories of accredited investors that are institutional (as opposed to individual) as defined and described in Rule 501(a)(1), (2), (3), and (7) of Regulation D of the Securities Act
For more information on Regulation D offerings, see Practice Note, Section 4(a)(2) and Regulation D Private Placements.