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SEC revises qualifications for accredited investors

The SEC adopted a final ruling earlier this month that revises the net worth standards that qualify an individual as an accredited investor, excluding the property value of a primary residence from the net worth assessment.

Under the final ruling, effective as of Monday, Feb. 27, when an individual files jointly or with a spouse, the individual’s primary residence is no longer counted as an asset. Debt secured by the individual’s primary residence is not counted as a liability unless the debt exceeds the value of the property or the debt was incurred within 60 days before sale of securities.

The new requirements are measured “at the time of the sale of securities to that person.” If an individual loses his or her status before purchasing the securities, the person will not qualify as an accredited investor. To be qualified as an accredited investor, the individual must meet the requirements and still report a net worth in excess of $1 million.

Before the passage of the Dodd-Frank Act, individuals were permitted to include the property value of their primary residence in calculating their net worth for the express purpose of determining whether he or she was an accredited investor.

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