Holders of professional certifications -- like Series 7 licenses that authorize individuals to sell securities -- will be eligible to invest in riskier assets under rule
The SEC said in a statement that the changes are meant to make it easier for firms to raise capital and “more effectively identify institutional and individual investors that have the knowledge and expertise to participate” in those offerings.
“Today’s amendments are the product of years of effort by the Commission and its staff to consider and analyze approaches to revising the accredited investor definition,” SEC Chairman
The changes, which were first proposed in December, adjust the SEC’s “accredited investor” standard. The policy has generally kept investors out of hedge funds, fast-growing technology companies that haven’t gone public and private equity funds unless they have a net worth of $1 million or higher and annual salaries of at least $200,000.
The SEC’s two Democratic commissioners voted against the revamp, arguing that by failing to update the net worth and compensation requirements for inflation, the regulator missed an opportunity to protect many unsophisticated investors from putting their money in potentially dangerous assets. Commissioners
“The failure to update the thresholds thus far has resulted in an increase of 550% in qualifying households since 1983,” Lee and Crenshaw said. “With its actions today, the commission continues a steady expansion of the private market, affording issuers of unregistered securities access to more and more investors without due regard for the risks they face.”
- The rules also expand the definition of accredited investors to potentially include “knowledgeable employees” of investment funds and limited liability companies with $5 million in assets.
- Groups such as Indian tribes, government bodies and foreign entities with more than $5 million in other investments would also be included.
- The move is that latest by Clayton, a political independent appointed by President
Donald Trump, to open up private markets to more investors.
- The changes will take effect 60 days after they are published in the Federal Register, the SEC said.
Hedge Funds, Unicorns May Open to More Investors in SEC Plan
(Updates with statement from Democratic commissioners, starting in sixth paragraph.)
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