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Securities law Section
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certain professional certifications,
designations or credentials from
an accredited educational institution
that the SEC has designated, or
(2) is a “knowledgeable employee”
of a private fund with respect to
investment in that fund. 1 Additionally,
the proposal permits spousal
equivalents to pool their finances
to qualify as “accredited investors.”
Amendments to the Financial
information provided to
non-Accredited investors in
Private Placements
Although Rule 506(b) of
Regulation D currently permits up
to 35 non-accredited investors, the
financial statement requirements
are overly burdensome to issuers,
which often results in zero nonaccredited
investors being able
to participate. In response, the
SEC has proposed changing the
financial information that must
be provided to non-accredited
investors in Rule 506(b) private
placements to align with the
financial information that issuers
must provide to investors in
Regulation A offerings. 2
Specifically, for Regulation D
offerings of up to $20 million in
securities, issuers would no longer
be required to provide audited
financial statements and would
instead be required to comply
with the requirements which
apply to Tier 1 Regulation A
offerings. For Regulation D
offerings of greater than $20
million in securities, issuers would
be required to provide audited
financial statements and comply
with requirements similar to
Tier 2 Regulation A offerings.
Taken together, these revisions
would permit additional persons
to qualify as “accredited investors”
and facilitate access to additional
private placements offerings for
non-accredited investors. n
1
See Amending the “Accredited Investor”
Definition, Release Nos. 33-10734,
34-87784 (Dec. 18, 2019), available at
https://www.sec.gov/rules/proposed/
2019/33-10734.pdf.
2
See Facilitating Capital Formation
and Expanding Investment Opportunities
by Improving Access to Capital in Private
Markets, Release Nos. 33-10763;
34-88321 March 4, 2020), available at
https://www.sec.gov/rules/proposed/
2020/33-10763.pdf.
Author’s Note: On August 26, 2020,
subsequent to the submission of the
above article, the SEC adopted final
rules regarding the amendments to
the definition of an accredited investor
which will become effective 60 days
after publication in the Federal Register.
See Amending
the “Accredited
Investor” Definition,
Release Nos. 33-
10824; 34-89669
(Aug. 26, 2020)
available at
https://www.
sec.gov/rules/
final/2020/
33-10824.pdf.
Authors:
Richard Bruner
& Cody Bilgrien
– Trenam Law
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