The SEC is considering adopting changes to its definition of “accredited investors” that may reduce the pool of accredited investors. While this reduction in the number of accredited investors would not preclude private companies and investment funds from relying upon the traditional exemptions under the securities laws (Rule 506, etc.), it would likely require enhanced informational disclosure to investors because not all offerees would continue to qualify as accredited, along with the resulting increase in legal fees incurred in connection with private placements of securities. Companies and investment funds seeking to raise capital from outside investors need to be sure that their fundraising activities are in full compliance with federal and state securities laws. Likewise, companies and investment sponsors who are considering private placements of securities this year may want to consider accelerating their fundraising sooner rather than later, due to the strong possibility the rules will change.
These issues and an explanation of the SEC recommendations under review are further described in PLDO partner and veteran business attorney, William F. Miller’s advisory available by clicking Recommended Changes to Accredited Investor Qualifications Could Complicate Raising Capital from Outside Investors. If you have questions or would like to speak to Attorney Miller about this issue or another business matter, email him at [email protected] or call 866-353-3310. We welcome your comments, questions and suggestions.