The Securies and Exchange Commission voted yesterday to propose new rules, that would in effect, apparently create a new definition of "accredited investor" for those investing in hedge funds and certain other pooled investment vehicles. The current definition of "accredited investor" is a person with over $1 million in net worth, or $200,000 in income ($300,000 for a couple). The new proposed standard would apparently be $2.5 million in 'investment assets', which (currently) excludes the value of the primary residence.
The WSJ reports that the net effect of the proposed rule would to reduce the percentage of American households that would qualify as 'accredited investors' from 8.5% to 1.29%. The percentage of households that qualified as 'accredited' in 1982, when the $1M/$200K standard was adopted, was 1.87%.
The rules, which still need to be published for comment, and then formally adopted, could have a definite effect on certain hedge fund vehicles. What also could be interesting is whether the SEC looks to apply this proposed standard to private offerings (Reg D), such as angel round financings for small companies. While there's no indication that the SEC is interested in regulating anything other than hedge funds with these new rules, there will be potentially different definitions of "accredited investors" in different contexts (i.e., private companies vs. 'pooled investment vehicles') and therefore an individual could be 'accredited' in one type of investment but not in another.
The proposed rule itself is not available yet on the SEC website. More information may be forthcoming.