SEC Updates Definitions of Accredited Investor and Qualified Institutional Buyer

On August 26, 2020, the Securities and Exchange Commission (the ”SEC”) amended the definitions of “accredited investor” in Rule 501(a) of Regulation D and “qualified institutional buyer” (“QIB”) in Rule 144A, each under the Securities Act of 1933 (the “Securities Act”). These amendments are part of the SEC’s broader effort to simplify, harmonize, and improve the exempt offering framework under the Securities Act, with the goal of promoting capital formation and expanding investment opportunities, balanced against the need to maintain appropriate investor protections. The main effect of the amendments to Rule 501(a) is to increase the number of eligible participants in the private placementmarket by adding additional categories of natural persons and entities that qualify as accredited investors. Similarly, the amendments to Rule 144A expand the entities that may qualify as a QIB. The amendments were proposed in December 2019 and were adopted largely as proposed.