SBIA Analysis: SEC’s Final “Accredited Investor” Rule

As noticed in the Federal Register, the SEC’s final rule regarding the definition of an “accredited investor” will become effective on December 8th.   The rule expands the criteria required for an investor to be deemed accredited beyond the current income and net worth thresholds to include individuals that hold certain licenses or certifications that demonstrate financial sophistication.

The SEC’s final rule included an initial order that allows individuals that have a FINRA Series 7, 65, or 82 license and are in good standing to be deemed accredited. Per the rule, the SEC can in the future, by order, permit holders of other designations – such as a CPA, CFA, or other FINRA licenses – to fit within the accredited definition. This represents an incremental approach to opening up private markets to more investors that may not be wealthy or earn enough annual income under current rules.

Additionally, the final also includes rural business investment companies (RBICs) as well as certain “knowledgeable employees” of private funds in the accredited definition. The rule also expands the definition of a qualified institutional buyer (QIB) to include certain LLCs and RBICs if they have $100 million in securities owned and invested.

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