SEC Commissioners and Staff Discuss Possible Amendments to Definition of Accredited Investor

Many hedge fund and other private fund managers rely on the private offering safe harbor set forth in Rule 506 of Regulation D, a fundamental benefit of which is that the issuer may offer securities to an unlimited number of “accredited investors.” Last year, after a staff review and consultation with its Advisory Committee on Small and Emerging Companies (Committee), the SEC issued a “Report on the Review of the Definition of ‘Accredited Investor’” (Report). On May 18, 2016, the SEC broadcast a public meeting of the Committee, at which SEC Chair Mary Jo White and Commissioners Michael Piwowar and Kara M. Stein, along with members of the SEC Office of Small Business Policy (part of the Division of Corporation Finance), discussed the Report with Committee members. This article summarizes the principal points raised during the meeting. For other recommendations regarding the definition of accredited investor, see “What Do the Investor Advisory Committee’s Recommendations Mean for the Future of Marketing of Hedge Funds to Natural Persons?” (Oct. 24, 2014); and “Best Practices for Ensuring That Only Accredited Investors Participate in Publicly Advertised Private Offerings by Hedge Funds (Part Two of Three)” (Oct. 17, 2014).

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