The accredited investor list grew without a wealth test change

The record

On 26 August 2020 the Securities and Exchange Commission adopted amendments widening who qualifies as an accredited investor for purposes of Regulation D private offerings. The adopting release, Release Nos. 33-10824 and 34-89669, is dated that same day and states an effective date of 8 December 2020. It adds several new qualifying categories: natural persons holding specified professional certifications such as the Series 7, 65 or 82 licenses; knowledgeable employees of a private fund with respect to that fund; family offices with at least 5 million dollars in assets under management and their family clients; and entities, including Indian tribes and certain other organizations, owning 5 million dollars or more in investments. The Commission's press release the same day quotes then-Chairman Jay Clayton describing the change as letting individuals qualify by demonstrated financial sophistication rather than income or net worth alone.

What the sources establish

The two documents together establish an addition, not a replacement. The existing tests, an income of 200,000 dollars individually or 300,000 dollars jointly, or a net worth of 1 million dollars excluding a primary residence, remain the primary route by which most individual investors qualify; the new categories sit alongside them. The release also amends the separate qualified institutional buyer definition in Rule 144A to add eligible entity types, a related but distinct change affecting resale of unregistered securities among institutions rather than the primary sale of a private round.

Scope and revision

The release is explicit about what it does not change. It records that commenters pressed the Commission to raise the income and net worth thresholds for inflation, some proposing a 2.5 million dollar net worth figure, and that the Commission declined, stating it did not believe the financial thresholds needed adjustment at that time and would continue to monitor the size of the accredited investor pool. That means the population qualifying through wealth alone was left exactly where it was; only the routes qualifying through credentials, employment or entity structure expanded. A reader should not infer that private offerings became open to a meaningfully larger pool of retail wealth from this release alone.

The decision in front of you

For a founder building an investor list, or an angel confirming eligibility, the practical takeaway is that new, narrower doors opened alongside the old ones rather than the old doors widening. This is an editorial reading: an individual who does not meet the income or net worth test may still qualify through a covered license or a qualifying family office relationship, and issuers relying on Rule 506(b) still bear responsibility for a reasonable basis to believe each purchaser fits a category the release actually created.

• Does a prospective investor qualify under the unchanged wealth test, or only under one of the 2020 categories?
• Has the investor's professional certification, employment or entity status been documented against the release's specific language?
• Would a claim that the pool of eligible investors grew substantially need a different, dated source to support it?

An expanded list of doors is not the same fact as a lowered threshold, and the adopting release supports only the former.