SEC Advisory Committee Recommends Broadening Accredited Investor Pool

In a voice vote on Tuesday, the U.S. Securities and Exchange Commission’s Advisory Committee on Small and Emerging Companies is making a recommendation to broaden the criteria for which investors are eligible to purchase unregistered securities. Currently, an accredited investor that can invest in these securities must have made at least $200K/year for the last two years or have a net worth of at least $1M (the value of one’s main residence not included). Under the recommended broader requirements, investors who have a chartered financial analyst or similar credential, or who have passed the series 82, 65, or 7 securities license exams, would also qualify. The advisory committee wants to create a bigger pool of accredited investor applicants to help small companies raise more funds.

Although the SEC committee’s recommendation isn’t binding, SEC Chairwoman Mary Jo White said that it is important to modify the existing accredited investor definition. The Dodd-Frank Act requires the Commission i to periodically look at the criteria defining an accredited investor.

In February, the US House of Representatives voted 347-8 to approve legislation that would expand that definition. The bill seeks to let any person with either professional experience and knowledge about a specific security— the individual does not have to be an investment professional—or who has a securities license, to invest in private placements.

Private Placement Fraud
As an accredited investor, it is important that you assess the risks involved with investing in private placements. Can you handle the lack of liquidity? Do private placements fit with with your investment goals? Remember that you are likely working with limited information about the security or the company who is making the offering.

Our private placement fraud lawyers represent investors who have been the victim of sales practice abuses, including misstatements and omissions and other fraudulent behavior. There are financial representatives who have recommended private placements even if they were not suitable for an investor. Contact The SSEK Partners Group today.

SEC Talks Crowdfunding, Grapples With Accredited Investor Rules, ThinkAdvisor, July 19, 2016

Dodd-Frank Act