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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On December 18, 2019, the Securities and Exchange Commission (SEC) proposed amendments to the definitions of accredited investors and qualified institutional buyers. The proposed amendments are intended to update and improve both definitions to more effectively identify institutional and individual investors having the knowledge and expertise to participate in private capital markets without the protections of the Securities Act of 1933, as amended (“Securities Act”). Specifically, the amendments would:

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Proposed New Categories of Natural Persons Qualifying as Accredited

The proposed amendments would add new categories to the accredited investor definition for natural persons who (1) hold certain professional certifications, designations or other credentials, (2) who are knowledgeable employees of and investing in the private fund, and (3) clarify the calculation of joint net worth.

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Modifications to the Calculation of Joint Net Worth: The proposed amendment would add a note to Rule 501 of the Securities Act to clarify that joint net worth can be the aggregate net worth of an investor and his or her spouse. Further, the securities being purchased by an investor relying on the joint net worth exception need not be purchased jointly.

Proposed Additional Categories for Qualifying Accredited Investors

The proposed amendments would expand the type of entities that qualify as accredited investors. Specifically, the amendments would expand the definition of accredited investors to include SEC and state registered investment advisers, rural business investment companies, limited liability companies, other entities meeting an investments-owned test, certain family offices and certain family clients.

The SEC also announced proposed changes to the definition of qualified institutional buyer under Rule 144A(a)(1) of the Securities Act. The proposed amendments would add RBICs and limited liability companies listed under Rule 144A as well as expand the list of entities eligible to be qualified institutional buyers to include institutional accredited investors that have a $100 million in securities owned.

Cassandra W. Borchers 513.352.6632 <a href="mailto:Cassandra.Borchers@ThompsonHine.com">Cassandra.Borchers@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2022/05/Investment_Management_Update_-_SEC_Proposes_to_Refine_Accredited_Investor_Definition_to_Increase_Investment_Access.pdf

SEC Proposes to Refine “Accredited Investor” Definition to Increase Investment Access

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