The SEC proposal to amend the definitions of "accredited investor" in Rule 501(a) of Regulation D and "qualified institutional buyer" under Rule 144A to increase accessibility to private capital markets was published in the Federal Register. Comments must be submitted by March 15, 2020.

According to the SEC, the "accredited investor" definition would be amended to:

  • add new categories allowing natural persons to qualify as accredited investors based on certain professional certifications and designations, such as a Series 7, 65, 66 or 82 license, or other credentials issued by an accredited educational institution;

  • add a new category for investments in a private fund based on the person's status as a "knowledgeable employee" of the fund;

  • expand the current list of entities that may qualify as accredited investors to include certain limited liability companies, registered investment advisers and rural business investment companies ("RBICs");

  • introduce a new category for any entity, including a tribal government, owning investments in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered;

  • add "family offices" with at least $5 million in assets under management and their "family clients," as each term is defined under the Investment Advisers Act; and

  • add the term "spousal equivalent" to the accredited investor definition by allowing spousal equivalents to pool their finances for the purpose of qualifying as accredited investors.

Additionally, the "qualified institutional buyer" definition would be modified to:

  • expand the types of entities eligible for qualified institutional buyer status to include certain limited liability companies and RBICs if they meet the $100 million in securities owned and investment threshold in the definition; and

  • add a "catch-all" category permitting certain institutional accredited investors to be qualified institutional buyers after satisfying the $100 million threshold.