[BREAKING] The SEC has relaxed rules that once prioritized net worth over financial sophistication
Following the publication of such plans in December 2019, the Securities and Exchange Commission (SEC) is currently revising the definition of “accredited investor” to loosen purely wealth-based requirements.
The SEC has relaxed rules that once prioritized net worth over financial sophistication
Recognized investors in the U.S. enjoy special privileges with the SEC – specifically, being able to engage in some simple form of stock trading like Regulation D.
The SEC emphasizes:
“The previous definitions relied on specific income and net worth criteria, which did not take their actual financial sophistication into account. In the case of the U.S., these requirements amounted to either $1 million in net worth or a stable income of at least $200,000 per year.”
SEC chairman Jay Clayton stated:
“The criteria is now expanded as the product of years of effort by the Commission and its staff to consider and analyze approaches to revising the accredited investor definition.”
The details are not entirely clear yet, but the new definition will allow anyone to qualify as an accredited investor based on professional certifications, designations or credentials, or other credentials issued by an accredited educational institution.
These institutions will be assigned at some point in the future at the discretion of the SEC. It is not clear what types of institutions can be recognized for these purposes and whether it requires specialized training courses or general economic and financial education.
Other small expansions of the criterion include “knowledgeable employees” of private equity funds and family offices with assets of more than $ 5 million under managed.
This decision could be the result of crypto-based fundraising, as it will expand the list of potential investors in security token offerings. However, it remains to be seen whether the new measures are general enough to expand the pool of recognized investors significantly.
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