SEC Raises Accredited Investor Threshold to Exclude Primary Residence
The SEC has adopted the final rule to raise the â€œaccredited investorâ€ threshold used for private placements. Commencing 60 days following its official publication (within 90 days), an â€œaccredited investorâ€ must have a net worth exceeding $1 Million, but such calculation excludes the investorâ€™s primary residence. Mortgage debt will be excluded as a liability except for mortgage debt in excess of the value of the residence and mortgage debt incurred within 60 days of the offering. The new rule also allows follow-on investments from current investors if the investor qualified on July 20, 2011 and the investor held securities of the same issuer on such date.
OUR TAKE: Allowing follow-on investments is a relief, but excluding mortgage debt in excess of the value of the primary residence will be difficult in this real estate market.