A Brief Rumination On Metaphysics, Trusts and Accredited Investors

I know that the practice of law requires a bit of abstract thinking. However, sometimes this abstract thinking takes a sharp turn into the metaphysical, if not the absurd. One such example is the SEC Staff’s Compliance and Disclosure Interpretation addressing who qualifies as an accredited investor as defined by Rule 501 of Regulation D.

First, a bit of background. Sometimes, an investor in a private placement will be a trust. Rule 501 offers several possibilities for concluding that a trust is an “accredited investor”. If the trustee qualifies as a financial institution under Rule 501(a)(1), then it may be possible for the trustee to participate for the benefit of the trust. Another option is for the trust to qualify under Rule 501(a)(7). However, the trust must have have total assets in excess of $5 million, the trust must not be formed for the specific purpose of acquiring the securities offered, and the purchase must be directed by a sophisticated person. If the trust can’t qualify under either of those options, one might be tempted to cast longing looks at Rule 501(a)(8). Here’s where the C&DI #255.21 comes in, which I’ve reproduced below...

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Published In: Administrative Agency Updates, Securities Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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