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Outlook Good For Expanded Accredited Investor Definition After Strong Approval In House
The bill changes (strictly by broadening) the definition of accredited investor, not sophisticated investor.
The former had been a purely objective standard (e.g. $1M in assets), and is generally required for someone to invest in unregistered securities (aside from intrastate offerings that are exempted under different rules - Rule 147 and the new Rule 147A). "Sophisticated investor" is more subjective (as you might expect from the words themselves) and appears in various aspects of the law.
In the narrower context of private placements, I believe the only place "sophisticated investor" appears is in one particular rule of several that allow private placements. That's Rule 506(b) (see 2nd bullet item on this SEC page about Rule 506).
In a more general sense, "accredited investor" is intended to imply that the investor is sophisticated. Of course that is absurd - a millionaire is not an expert on leveraged buyouts by virtue of having amassed $1M (unadjusted for inflation since 1982). Jason Zweig, WSJ Blog, Do You Consider Yourself as a Sophisticated Investor
The bill that is the subject of the IN article does make "accredited investor" look a bit more like "sophisticated investor". It allows consideration of education and experience. That seems like a move in the right direction. But you'll have to go to FINRA to get your personal stamp of approval.
The bill does nothing to protect the affluent but naive millionaires. Companies are still free to sell them high risk, unregistered, poorly disclosed securities in large enough volume to take them in a single leap directly from Millionare Acres to the Poor Farm.
Comments
The former had been a purely objective standard (e.g. $1M in assets), and is generally required for someone to invest in unregistered securities (aside from intrastate offerings that are exempted under different rules - Rule 147 and the new Rule 147A). "Sophisticated investor" is more subjective (as you might expect from the words themselves) and appears in various aspects of the law.
In the narrower context of private placements, I believe the only place "sophisticated investor" appears is in one particular rule of several that allow private placements. That's Rule 506(b) (see 2nd bullet item on this SEC page about Rule 506).
In a more general sense, "accredited investor" is intended to imply that the investor is sophisticated. Of course that is absurd - a millionaire is not an expert on leveraged buyouts by virtue of having amassed $1M (unadjusted for inflation since 1982).
Jason Zweig, WSJ Blog, Do You Consider Yourself as a Sophisticated Investor
The bill that is the subject of the IN article does make "accredited investor" look a bit more like "sophisticated investor". It allows consideration of education and experience. That seems like a move in the right direction. But you'll have to go to FINRA to get your personal stamp of approval.
The bill does nothing to protect the affluent but naive millionaires. Companies are still free to sell them high risk, unregistered, poorly disclosed securities in large enough volume to take them in a single leap directly from Millionare Acres to the Poor Farm.