On January 25, 2011, the SEC proposed new amendments to conform the definition of “accredited investor” under Rule 215 of the Securities Act of 1933 and Rule 501 of Regulation D to requirements imposed by Congress under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Various exemptions for private or other limited offerings of securities under the Securities Act of 1933 and state “blue sky” laws depend on whether participants are “accredited investors.” Non-accredited investors who participate in private offerings under Rule 505 or Rule 506 of Regulation D must receive financial and other information that is not required to be given to accredited investors.

Dodd-Frank required that the “net worth” test for natural persons exclude the value of the person’s primary residence, without specifying how such value would be calculated. Under the SEC’s proposals, a person’s net worth would exclude “the value of the primary residence” calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property. The SEC’s proposed rule change is substantially similar to the Staff guidance published shortly after the enactment of Dodd-Frank.