Hello I'm Jessica Mckinney from the SEC's Office of the Advocate for Small
Business Capital Formation. The SEC
proposed amendments to update the
accredited investor definition. This is
the first rulemaking proposal to come
out of this summer's harmonization
concept release in which the Commission
solicited your feedback on how to
harmonize and improve the rules for
exempt or private offerings. Let's take a
step back and explain why this
definition is important, then we'll
explore the proposed changes. Qualifying
as an accredited investor determines
whether you can invest in companies and
funds using the most commonly used
private offering types. Most angel
investor, venture capital, and private
equity transactions rely on this
definition. The current rule uses wealth
or income to determine whether investors
do not need the protections that come
from registration, because of their own
sophistication and financial profile.
Who can participate in private market
transactions is critical both for the
investors access to investment
opportunities as well as companies'
ability to raise the capital they need
to grow and thrive. Now let's dive into
the changes. The proposal leaves the
current wealth or income thresholds in
place but adds other means of
qualifying. The proposal also permits
spousal equivalents to qualify under the
joint income thresholds like married
couples. The proposal would add new
measures of sophistication for
individuals to qualify as accredited
based upon their having certain types of
professional credentials or their status
as a knowledgeable employee of a private
fund. For entities I'd like to highlight
two proposed changes. First the proposal
would expand the types of entities that
can qualify capturing all existing
entity forms including LLC's, Indian
tribes, and family offices as well as
entity types that could be created in
the future.
Second for many of the new entities to
qualify they would use a new five
million dollars in investments test
rather than the five million dollars in
assets used under the current rule. This
video was produced by the SEC's Office
of the Advocate for Small Business
Capital Formation and is meant to
provide only a very high-level summary
of the proposed amendments. I encourage
you to look at the release for more
details and how to share your feedback
with us. Check out our office's how to
comment video for more information.
Help shape the future of capital raising.
