SEC Proposes Rules to Amend Net Worth Standard for Accredited Investor Definition

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On January 25, the Securities and Exchange Commission proposed rules amending the accredited investor standards under the Securities Act of 1933 to reflect the requirements of Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed rules would amend Rules 215 and Rule 501(a)(5) of the Securities Act to exclude the value of a person's primary residence from the $1 million net worth (or joint net worth) test for determining whether a person is an "accredited investor" under Regulation D. The proposed rules would also amend Rules 215 and Rule 501(a)(5) to clarify that net worth is calculated by excluding only the investor's net equity in its primary residence by adding the phrase "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." While this clarification (as well as the technical and conforming amendments referenced below) supplements Section 413(a) of the Dodd-Frank Act, the exclusion itself was effective upon enactment of the Dodd-Frank Act.

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