01.23.07
Accredited Investor
At an open meeting on December 13, 2006, the SEC voted to propose a change to the definition of “accredited investor” that, if adopted, would apply to offers and sales of securities issued by hedge funds and other private investment pools to “accredited natural persons”. The proposal requires “accredited natural person” to be both “accredited investors” under the existing standards and own not less than $2.5 million in investments (as currently defined in the Investment Company Act for purposes of the Section 3(c)(7) exemption) on the date an investment is made. The $2.5 million test will be periodically adjusted for inflation.
The SEC release estimates that the accredited natural person definition, if adopted as proposed, would significantly reduce the number of U.S. households that are eligible to invest in private investment vehicles. By the SEC Staff’s calculation, approximately 8.47% of U.S. households currently qualify for accredited investor status under Regulation D. The Staff estimates that this percentage would drop to approximately 1.3% with respect to investments in private investment vehicles if the accredited natural
person standard is adopted.
This would be interesting if adopted as it has a lot of implication to smaller PE funds…