The Government Accountability Office ("GAO"), as required by the Dodd-Frank Act, published a report on possible alternative criteria for qualifying as an "accredited investor." Beginning in 2014, the SEC is required to review the accredited investor definition every four years to determine whether it should be adjusted and the GAO believes that its study will provide a reasonable starting point for the SEC's review. The GAO obtained views of market participants on eight alternative criteria which are grouped under two new categories - financial resources and understanding financial risk.

In connection with the existing criteria, market participants cited net worth as the most important criterion. Under the new "financial resources" category, market participants indicated that using a liquid investments requirement was the most important alternative for balancing investor protection and capital formation. A liquid investments requirement would require that an investor have a minimum dollar amount of investments in assets that can be easily sold, are marketable and the value of which can be verified. Another alternative under the "financial resources" category is the requirement of a fixed percentage investment, which would require an investor to limit its investments in any single, non-public securities offering to a certain percentage of its individual net worth or income.

Under the new understanding of financial risk category, market participants selected the use of a registered investment adviser as the most important alternative. The other alternatives under this category are self-certification investor designation, license and certification standard, an investor sophistication test, an education standard, and the opt-in provision pursuant to which investors would sign a statement waiving certain rights.

The GAO report will be considered by the SEC in its upcoming review of the "accredited investor" definition.