Policy Considerations and Next Steps for Fund Managers From the Revised Accredited Investor Standards

To much recent fanfare, the SEC adopted a final rule (Amendments) amending the definition of “accredited investor” under Rule 501(a) of Regulation D of the Securities Act of 1933. Although the SEC has previously clarified the accredited investor definition through various no‑action letters, the Amendments arguably reflect the SEC’s most significant changes since the adoption of the “bright-line” annual income and net worth tests under Regulation D in 1982. In a guest article, Arnold & Porter attorneys Ellen Kaye Fleishhacker and William G. LeBas describe key features of the Amendments, focusing on changes likely to be of greatest interest to fund sponsors. The article also examines the policy considerations behind, and implications of, the Amendments, including certain controversies generated by the Amendments. Finally, it includes practical guidance for fund sponsors seeking to institutionalize the Amendments into their legal documents; operations; and policies and procedures. See our two-part series on the original proposal to change the accredited investor definition: “Proposed Changes and SEC Commissioner Perspectives” (Mar. 3, 2020); and “Key Takeaways for Private Fund Managers” (Mar. 10, 2020).

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