Rulemaking to Revise the Accredited Investor Standard

Best I can tell, the SEC is still planning to "[p]ropose rules to revise the 'accredited investor' standard" in the first quarter of this year.

I'm hoping the proposed rules will be a non-event, meaning I hope they will do nothing more than conform language under Regulation D to the change already implemented and effective upon the President's signing of Dodd-Frank last year.

It would be easy to read too much into a forum the SEC held in November, in which staff seemed (at least to me) to be signalling that it would be premature to raise the annual income thresholds of the definition before a needed study had been completed. But a part of me remains on edge, given that the NASAA has submitted comments in which they at least appear to think the time has already come to drastically increase the annual income thresholds and to introduce still more barriers to angel investing.

In November, Joe Wallin and I wrote a letter to the SEC, answering the NASAA letter, in effect, and putting the issue into context. That context includes not only the import of the current standards to the vitality of the startup ecosystem, but also the circumstances around the compromise that resulted in limited changes to the accredited investor definition under Dodd-Frank.

The SEC has made it easy to submit comments and I'm surprised that more people have not done so; as of this posting the relevant SEC page indicates no new comments in the last six weeks. Maybe people are waiting to see the actual text of the proposed rules. (The SEC is not as cagey with its proposed rules as the FCC was with its recent open internet rules.)

One issue I have not focused on in this blog to date are the "bad boy" provisions that, under Dodd-Frank, will be added now to Regulation D. This does not impact the accredited investor definition, but it may impact which startups can and cannot use Regulation D, based on whether they have "bad actors" in their midst. In any case, I bring it up here because proposed rules to implement that aspect of Dodd-Frank appear to be forthcoming from the SEC this quarter, as well.