SEC Adopts "Accredited Investor" Definition

Our previous alert dated December 19, 2011, described proposed changes to the "accredited investor" standards. On December 29, 2011, the Securities and Exchange Commission (the "SEC") adopted final rules implementing these proposed changes. The primary differences between the proposed and final rules are described below.

1) Generally. As set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the definition of "accredited investor" continues to provide for a net worth threshold for natural persons of $1,000,000; however, for purposes of the threshold the net worth calculation excludes the person's primary residence.

2) Indebtedness. Under the final rules, the net worth calculation does not include indebtedness secured by the person's primary residence up to the estimated fair market value of the primary residence (except for indebtedness incurred in the 60 days before the time of sale of securities, as