The Frank-Dodd Wall Street Reform and Consumer Protection Act (the “Act”) amended the definition of “accredited investor” under the Securities Act of 1933, as amended, by requiring that any natural person who is intending, with or without that person’s spouse, to be deemed an “accredited investor” based on the $1 million dollar net worth test, exclude the value of the primary residence of the natural person in the calculation. The Act authorizes the Securities and Exchange Commission to review the definition of “accredited investor” as such term applies to natural persons, to determine whether other requirements of the definition should be modified for the protection of investors, in the public interest and in light of the economy and, thereafter, make such adjustments as the SEC deems appropriate. While the SEC has not issued amendments to its rules to reflect this change, this amendment to the calculation of net worth in the definition of accredited investor was effective upon adoption of the Act on July 21, 2010.
Offering documents and purchase/subscription agreements (and, in some cases, operating or governing agreements) currently being used or in the process of being prepared should be revised to reflect these amendments to the definition of “accredited investor”.
The Act contains numerous other changes in or proposed changes to current laws which are not summarized herein. A copy of the Act is available at http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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