Amendments to Rule 215 and Rule 501(a) expand “Accredited Investor” and “QIB” qualification criterion to add individuals that will qualify as accredited investors. A summary of changes are cited below, or the Adopting Release is available, here:
Per the National Law Review, the amendments…
- “expand and clarify existing categories of accredited investors;
- add new categories of individuals and entities that will qualify as accredited investors; and
- moderately expand the definition of “qualified institutional buyer” or “QIB” in Securities Act Rule 144A and the permitted scope of “testing the waters” pursuant to Securities Act Rule 163B.”
New amendments include new criterion:
Accredited Investor – earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). Additionally, any trust, with total assets in excess of $5 million, not formed specifically to purchase the subject securities, whose purchase is directed by a sophisticated person, or any entity in which all of the equity owners are accredited investors.
Non-Accredited Investor – does not meet the requirements listed by the SEC to qualify for accredited investor-only offerings.
Sophisticated Person – all non-accredited investors must be deemed a sophisticated person; i.e., the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.
Qualified Institutional Buyer (QIB) – a purchaser of securities that is deemed financially sophisticated and is legally recognized by securities market regulators to need less protection from issuers than most public investors; requires $100 million in owned and invested securities; or, entities owning investments in excess of $5 million that are not formed for the specific purpose of acquiring securities, as well as any other entities that may be added to the accredited investor definition in the future, provided that any such entities would also have to meet the $100 million threshold may qualify.
Supporting articles can be found here for reference:
- Updated Investor Bulletin: Accredited Investors
- SEC Expands Accredited Investor Definition To Allow More Participation in Private Offerings
- SEC Expands the “Accredited Investor” and “QIB” Definitions and the Permitted Scope of “Testing the Waters”
- Adopting SEC Release
- Rule 506 of Regulation D
Articles will continue to be posted and updated based upon new amendments, opinions or interpretations, thereof.