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SEC Updates Definition of Accredited Investor

On August 26, 2020, the Securities and Exchange Commission (“SEC”) issued a press release indicating that it had adopted amendments to the definition of “accredited investor.” The amendments, among other things, added to the list of individuals who qualify as accredited investors, holders in good standing of a Series 7, Series 65, or Series 82 license. The amendments also updated the definition of accredited investor to include, with respect to investments in private funds, natural persons who are “knowledgeable employees” as defined in Rule 3c(5)(a)(4) of the Investment Company Act of 1940. This change could prove significant for private funds with under $5 million in assets under management which wish to allow certain employees to participate in the private fund’s offering.

The SEC’s release can be found here:

The Final Rule adopting such amendments can be found here:

Update: On October 9, 2020, the SEC published the Final Rule in the Federal Register. The changes to the definition of Accredited Investor will become effective on December 8, 2020.

This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Taylor Wilkins

Taylor Wilkins

Taylor Wilkins is in-house counsel at AllianceBernstein. Prior to that, he was a private fund attorney at Riggs Davie PLC.

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