The U.S. Securities and Exchange Commission has adopted an amended "accredited
investor" net worth standard that, in accordance
with the Dodd-Frank Act, excludes
the value of an individual's primary residence. The definition
of accredited investor, used to determine the availability of
certain exemptions from the Securities Act of 1933 for
private and other limited offerings, currently includes individuals
exceeding $1 million in net worth. The recently-adopted changes
would maintain the $1 million threshold, but no longer allow for a
primary residence to be included in calculating net worth. As we
described in a blog post last year, the SEC first
proposed the change in January 2011. The amended standard will
become effective on February 27, 2012.
The accredited investor exemption has also garnered attention
north of the border. Specifically, the OSC expressed concern last year that issuers and
dealers were improperly relying on the accredited investor
exemption to ineligible investors. As we discussed in a November 2011 post, Canadian regulators have
now also launched a review of the domestic accredited investor and
minimum investment amount exemptions. Under Canadian rules, the
accredited investor standard for individual investors includes both
a $1,000,000 financial asset test and a $5,000,000 net
asset test, with only the latter including an investor's
personal residence (minus liabilities). Depending on the feedback
(the consultation period ends on February 29th), possible options
include keeping the status quo, retaining the exemptions
with adjusted thresholds, limiting the use to certain investors
(such as institutional investors), using alternative qualification
criteria or imposing other investment limitations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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