Doug Cornelius on the accredited investor definition post-DOMA

Important post this week from Doug Cornelius, weighing in on what happens to the accredited investor definition, following the Windsor case: "DOMA, the SEC, and the Accredited Investor."

Doug's core analysis is that the SEC need do nothing to extend the benefits of the marital accredited investor standard to persons in same sex-marriages:

"The US Supreme Court decided that Section 3 of the Defense of Marriage Act is unconstitutional. Therefore, the accredited investor definition’s use of the word 'spouse' is no longer restricted by DOMA to a person of the opposite sex who is a husband or a wife.

"In the states that allow same-sex marriage, an issuer should now be able to allow a same-sex married couple to combine their income to meet the standard. I don’t think the SEC needs to take any action for this to happen."

Doug also takes up the question of whether persons in civil unions in states that designate the participants as "spouses" will be spouses for purposes of the SEC rule. He references an Illinois statute that just so designates.

6a01156e3d83cb970c0192abcdde0d970d-800wiLastly, Doug wonders if the question of civil union partnerships might be dealt with in the SEC's overdue rulemaking (it's going to happen sometime, isn't it?) to lift the ban on general solicitation in Rule 506 deals limited to accredited investors.

Part of that rulemaking involves setting heightened standards for accredited investor "verification."

I had not thought about this before Doug's post, but is it possible that "verification" will require issuers to look into the scope of a given investor's domestic relationship? Crazy. More reason that the SEC should interpret "spouse" more broadly than the Supreme Court's Windsor holding requires!

Leave it to Doug to identify new dots by connecting them.

Image: Arthur T. Bens / Flickr.


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