The term “accredited investor” is a critical component of several exemptions from registration, most notably Rules 506(b) and 506(c) of Regulation D under the Securities Act of 1933, and plays an important role in other securities law contexts. Qualifying as an accredited investor is significant because accredited investors may participate in investment opportunities that are generally unavailable to non-accredited investors – including investments in offerings by hedge funds and private equity funds. The definition of accredited investor, however, has not been significantly updated since it was adopted in 1982. The SEC recently approved proposed changes to that definition (Proposal) and is accepting comments on the Proposal through mid‑March. This two-part series explores the proposed amendments to the accredited investor definition and their implications in the private funds context. This first article examines the key proposed amendments to this important definition, along with the views of the SEC commissioners on the Proposal. The second article
will discuss the key takeaways from the Proposal for private fund managers. For more on the concept release on the exempt offering framework that initially broached the idea of updating this definition, see our two-part series: “Review of the Concept Release
” (Sep. 5, 2019); and “Key Takeaways From the Concept Release for Private Fund Managers
” (Sep. 12, 2019).