Investment attorneys would like to make investors aware that the final rule declaring the net worth standard for “accredited investors” has been adopted by the Securities and Exchange Commission. The SEC still had to adjust its rules to the modification despite the fact that the modified definition was effective upon the enacting of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
According to the Securities Act of 1933, unless there is an exemption, such as “accredited investor” status, all U.S. securities sales and offers must be registered. Before the Dodd-Frank Act was enacted, an investor’s main residence, along with its fair market value and indebtedness, were included when calculating an investor’s net worth. In order to be an “accredited investor,” one’s net worth must be at least $1 million.
According to the Dodd-Frank Act’s Section 413(a), when determining if an individual is an “accredited investor,” the value of that person’s primary residence cannot be included. Determining if a person is an “accredited investor” is used to identify people who can withstand the economic risk of investing in unregistered securities. Securities that are unregistered for an indefinite timeframe can result in total investment losses. While personal residence cannot be included when determining an investor’s status, per the Dodd-Frank Act, if there is indebtedness associated with the residence, this amount can still lower the net worth of the investor. This rule will lower the number of individuals that receive “accredited investor” status. However, individuals that were previously considered “accredited investors,” but no longer meet the $1 million threshold because of the rule changes, will be given a limited grandfathering that allows them to continue to receive accredited status for certain “follow-on” investments.
The final rule will be published in the Federal Register and will go into effect 60 days after its publication.
If you were sold unregistered securities but do not meet the $1 million net worth threshold for “accredited investor” status, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.