President Obama has signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
This means that the new definition of accredited investor is now in effect. The new definition applies to existing offerings. It is effective immediately.
Under the new definition, in determining whether an individual is an accredited investor under the net worth standard, the value of the primary residence of the investor must be excluded. See Section 413 of the Act, quoted below.
For individual investors to qualify as accredited investors, they will now have to meet one of the three following categories.
- A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer.
- A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value (if any) of such investor’s primary residence.
- A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those years and a reasonable expectation of reaching the same income level in the current year.
SEC. 413. ADJUSTING THE ACCREDITED INVESTOR STANDARD.
(a) In General- The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person.