SEC Updates Accredited Investor Definition

Effective December 8, 2020, there is a new definition of “accredited investor” in Rule 215 and Rule 501(a) of the Securities and Exchange Commission’s (SEC) Regulation D.

Accredited investors—considered to be sufficiently sophisticated and risk tolerant—are permitted to participate in certain private offerings under Regulation D that are not subject to the same investor protections as public offerings. The new accredited investor definition expands the class of individuals and entities who qualify, widening the pool of potential investors for private offerings and better harmonizing the definition with other securities regulations.

The current regulations use wealth as a rough proxy to gauge financial sophistication. Continue reading to learn more about individuals who qualify.

Thank you to Dylan S. O’Sullivan, a third year law student at Northeastern University School of Law, for his contributions to this article.