SEC Proposes Updates to ‘Accredited Investor’ Definition

In an effort to increase access to capital markets, the Securities and Exchange Commission today proposed updating the test for an “accredited investor” to include individuals’ qualifications based on professional knowledge, experience or certifications, as well as expanding the list of entities that may qualify. Today, the test for which institutional and individual investors may participate in private capital markets are based on income and net worth.

“Modernization of this approach is long overdue,” said SEC Chairman Jay Clayton. “The proposal would add additional means for individuals to qualify to participate in our private capital markets based on established, clear measures of financial sophistication.”

American Bankers Association staff will review the proposal closely and will urge amendments to the definition of “qualified institutional buyer” under Rule 144A. Comments are due 60 days after the proposal is published in the Federal Register.