Stockbroker Law - Tuesday, March 08, 2016
SEC Issues Report on Definition of Accredited Investor

On December 18, 2015 the United States Securities and Exchange Commission issued a Report on the Review of the Definition of “Accredited Investor.” The fringe market involving the sale of private placement investments to qualified investors pursuant to exemptions under Regulation D have exploded in the past ten years. Regulation D is an exception to the filing requirements for offering companies involving packaging and selling private placement investments to public investors. Unfortunately, many firms involved with the sale of private placements have abused these guidelines and have engaged in gaming of the accredited investor qualification requirements to advance the marketers self-interests in raising capital for their deals.

In its report, the SEC has recommended raising the income and net worth thresholds of $200,000 of individual income for each of the past two years or $1,000,000 in net worth, exclusive of primary residence, to take into account inflation and monetary indexing given the fact that these original monetary perimeters were established in 1982. The SEC has suggested a minimum individual income of $500,000, joint income of $750,000 and a minimum net worth of $2,500,000, being the proposed levels above which individuals would not be subject to limitations.

While the Report seeks to better define the rules and qualifications relating to the sole of private placement investments to public investors pursuant to an exemption of the Regulation D, the fact remains that many unscrupulous securities brokerage firms as well as unregistered sales persons engage in the sale of these investments using trickery such as misstated income and/or net worth figures in Accredited Investor questionnaires, coupled with various other misrepresentations made to unsuspecting investors at the time of the initial investment.

We offer a free initial consultation to investors who feel they may have been victimized with the inappropriate sale of a private placement investment. For an initial consultation, contact Timothy J. O’Connor at the Law Offices of Timothy J. O'Connor at (518) 426-7700.


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