The accredited investor (AI) definition is an extremely important component of the private placement market. A significant amount of capital is raised using Regulation D, and accredited investors participated in 89 percent of reported Regulation D offerings from January 2009 through December 2012. (In other words, only 11 percent of reported Regulation D offerings during this period involved non-accredited investors.) The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the Securities and Exchange Commission (SEC) review the AI definition for natural persons beginning in 2014 and every four years thereafter.
As part of the review process, the SEC has received a significant number of recommendations from comment letters and from two SEC advisory committees. While the vast majority of commenters recommended not changing the current AI definition, others recommended raising the financial thresholds cited in the definition or adjusting them for inflation. Still others offer alternate recommendations, including adding a new AI category for financial sophistication or allowing a percentage of income or net worth to be used in qualifying private placements.
For details and analysis of the recommendations by the SEC committees and by commenters, read the white paper, titled "The SEC Considers Updating the Accredited Investor Definition: A Discussion of Status, SEC Advisory Committee Recommendations and Comments."
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