SEC Adopts Net Worth Standard for Accredited Investors under Dodd-Frank Act

The SEC adopted a final rule amending the net worth standard in the definition of accredited investor under the Securities Act to conform the definition to the requirements of the Dodd-Frank Act.

PLC Corporate & Securities

On December 21, 2011, the SEC adopted a final rule amending the net worth standard in the definition of "accredited investor" under the Securities Act to conform the definition to the requirements of Section 413(a) of the Dodd-Frank Act.

SEC rules permit certain private and limited offerings to be made without registration under the Securities Act if sales are made only to accredited investors (see Practice Note, Section 4(2) and Regulation D Private Placements). One way that individuals may qualify as accredited investors is by having a net worth, alone or with a spouse, of at least $1 million.

The final rule adopted by the SEC on December 21, 2011:

Under the amended net worth calculation:

The changes to the net worth standard have been in effect since July 22, 2010, the date the Dodd-Frank Act became effective, but the final rule implements these changes under the Securities Act. The final rule is consistent with earlier Compliance and Disclosure Interpretation guidance issued by the SEC when the Dodd-Frank Act was adopted (see Question 255.47, Compliance and Disclosure Interpretations: Securities Act Rules).

The final rules take effect 60 days after publication in the Federal Register.

For a description of the definition of accredited investor, including a discussion of the amended net worth standard, see Practice Note, Section 4(2) and Regulation D Private Placements: Accredited Investors.

 
{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247573202061", "objName" : "ACT_OWNED - READ_ONLY - 9-517-0356", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/9-517-0356?q=&qp=&qo=&qe=", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "2-2ca065c1:15a8112ca0b:49a1", "analyticsSessionCookie" : "2-2ca065c1:15a8112ca0b:49a2", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }