The Securities and Exchange Commission (SEC) recently approved amendments to the definition of an accredited investor found in Rule 501(a) of the Securities Act of 1933 that will facilitate the ability of funds and other issuers to raise capital through private placements. Several commenters on the SEC’s proposed rule cautioned that a rise in civil litigation and regulatory actions would likely result from what would be generally perceived as a broadening of the accredited investor standard. Noting these concerns, the SEC’s adopting release cited a recently completed analysis by the agency’s staff of publicly available information on SEC litigation against Regulation D issuers which found that there were relatively few SEC civil court cases involving private placements over the 2009-2019 period compared to the total number of private placement filers. Time will reveal which of these arguments will prove to be correct.

Read the full client alert for a full discussion of these new revisions to the accredited investor standard and how they will affect private fund sponsors going forward.