Sophisticated Investor Standard for Private Placements?

STOCKBROKER LAW - Posted on March 17, 2016

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.

The Report also suggests altering the definition of an accredited investor to permit investments by
limited liability companies, corporations, labor unions, social organizations, sovereign wealth funds,
529 retirement plans and other entities to qualify as accredited investors, no
longer limiting the definition of an accredited investor to natural persons. The Report also suggests
that under certain circumstances, individuals meeting the definition of sophisticated investors, while
not meeting the net worth/income perimeters of an accredited investor, might likewise nonetheless be
considered for in investment and private placements in addition to Regulation D.

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.