The new accredited investor standards primarily add non-quantitative items to the list of qualification criteria. Investors who meet the following criteria may qualify as accredited investors when the new rules become effective even if they do not meet the current quantitative requirements:
- Holders of certain professional licenses which are deemed to demonstrate relevant professional knowledge. Currently this includes holders of SEC Series 7, Series 65 and Series 82 licenses, although the SEC has invited the public to propose additional certifications, designations or credentials that should be included in this definition.
- For investment in a private fund, “knowledgeable employees” of the private fund.
- Limited liability companies with at least $5 million in assets (this was largely a clarification of the existing rules, but is important given the significant growth in the use of limited liability companies).
- SEC- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies.
- Any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered.
- “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.
In addition, “spousal equivalents” may now pool their financial resources with an investor for the purpose of qualifying as an accredited investor. This is significant because it shows the SEC is acknowledging a social reality rather than just a quantitative situation.