Last week the SEC adopted rule amendments to the definition of “accredited investor” under Regulation D (“Reg D”) of the Securities Act of 1933. The rule amendments, the SEC says, are intended to modernize a term that has not changed in nearly 40 years and to “more effectively identify institutional and individual investors that have the knowledge and expertise to participate in” today’s “multifaceted and vast private markets.”
Continue Reading Updated SEC Definition Opens Private Markets to (a Handful of) New Investors

On August 26, 2020, the SEC adopted amendments to update the definition of “accredited investor” in Rule 501(a) of the Securities Act, adding new categories of individuals who may qualify as accredited investors based on measures of knowledge, experience, or certifications, and expanding the list of entities that can qualify as accredited investors. The SEC

Funds Don’t Identify Rule 144A and Regulation S Securities as “Restricted”

Notwithstanding my technical interpretation of “restricted security” in Part One, my sampling of recent annual reports found no funds treating Rule 144A or Regulation S securities as restricted.
Continue Reading Are There Still Such Things as Restricted Securities?—Part Two

Rule 6-03(f) of Regulation S-X requires investment companies to make specific disclosures regarding any investments in “restricted securities,” defined as “securities which cannot be offered for public sale without first being registered under the Securities Act of 1933 [the “1933 Act”].” The recently enacted Fixing America’s Surface Transportation (FAST) Act expands the ability to sell unregistered securities. This poses the question of what impact the FAST Act may have on fund disclosures.

Part One explains what S-X requires; Part Two will explain what funds do and how this might change as a result of the FAST Act.
Continue Reading Are There Still Such Things as Restricted Securities? —Part One

Family Offices frequently acquire interests in private funds as part of the family office asset allocation process. Private funds have to be certain of the validity of their ability to rely on an exclusion from the definition of “investment company.” The Family Office Rule under the Investment Advisers Act has a detailed definition of “family member” for purposes of that exemption.  In general, a person is a “family member” if he is a lineal descendant of a common ancestor, or a spouse or child of a lineal descendant. There is also a definition of “family client” that includes every possible trust, charitable organization, or ownership situation to which the family office could give investment advice. But the Investment Company Act also defines “family,” differently, in the two most commonly used exclusions from the definition of “investment company.” 
Continue Reading Investing in Private Funds: Conflicting Definitions of “Family”