The SEC released two new rules yesterday: one on mine safety (I wonder how many securities lawyers have ever set foot in a mine) and the other changing the net worth standard for accredited investors. Both new rules come to us courtesy of Dodd-Frank.
Because mine safety disclosure isn’t really my forte, I’ll focus on accredited investors. Under the new rule, set to become effective in February, individuals will no longer be able to include the value of their primary residency as an asset in the calculation of net wealth for accredited investor status. So pay heed, all you issuers hoping to avoid registration purusant to Reg D of the ’33 Act! That guy who spends everything trying to make his house the best on the block? Instead of being an “accredited investor”, he might be just “that guy with the really gaudy house.” On the flipside, the rule no longer treats your mortgage as a liability either (with a few exceptions), so the net impact of the change will be diluted in many instances.
And there are, of course, other ways an individual can qualify as an accredited investor (earning over $200,000 a year, for example), so this shouldn’t hurt Reg D offerings much, but it’s definitely something to watch out for.