SEC Adopts Amendments To Accredited Investor Standards To Implement Requirements Of Section 413(A) Of The Dodd-Frank Act

January 25, 2012 | Comments Off on SEC Adopts Amendments To Accredited Investor Standards To Implement Requirements Of Section 413(A) Of The Dodd-Frank Act
Posted by Patrick Convery

The United States Securities and Exchange Commission recently adopted amendments to the Accredited Investor Standards in its rules under the Securities Act of 1933 to implement the requirements of Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Section 413(a) requires the definition of “accredited investor” in the Securities Act of 1933 rules to exclude the value of a person’s primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million.

The definition of “accredited investor” prior to the enactment of Section 413(a) of the Dodd-Frank Act provided that an accredited investor included an individual whose net worth exceeded $1 million, including the value of the individual’s primary residence.  The standard adopted in Section 413(a) of the Dodd-Frank Act which has now been incorporated in the SEC rules amend the definition of “accredited investor” to expressly exclude the value of an individual’s primary residence from the net worth calculation.  The amount of any indebtedness secured by the primary residence is also generally excluded from the net worth calculation.  However, if the amount of the indebtedness exceeds the value of the residence, the excess will be treated as a liability and will be deducted from net worth.

The SEC has also made certain technical amendments to SEC Form D and a number of other related rules to conform them to the requirements of Section 413(a) and to correct certain cross-references to former Section 4(6) of the Securities Act, which was renumbered Section 4(5) by Section 944 of the Dodd-Frank Act.

The effective date of the above amendment is February 27, 2012.  The amendments adopted by the SEC include amendments to Rule 144(a)(3)(viii), Rule 155(a), Rule 215 and Rule 501(a)(5) and Rule 501(e)(1)(i) of Regulation D of the SEC Rules under the Securities Act of 1933, Rule 500(a)(1) of the Securities Act form rules, Form D under the Securities Act, Rule 17j-1(a)(8) under the Investment Company Act of 1940 and Rule 204A-1(e)(7) under the Investment Advisors Act of 1940.

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