For those of you who have not yet had the opportunity to pour over the scintillating new page burner a recommendation on the Accredited Investor Definition approved by the Investor Advisory Committee to the SEC – allow me to provide a distillation. The definition of an “Accredited Investor” (“AI”) is used to determine the eligibility of investors to participate in the private securities market by buying shares in private companies, including startups. Since 1982 this has been defined for individuals by meeting an income threshold ($200K/yr individual or $300K/yr for joint tax filings) or a net worth threshold ($1MM excluding value of primary residence). The objective was to define a class of (AI) individuals able to “fend for themselves,” meaning they are able to sustain a loss and not cry too much about it. The flaws and shortcomings of using income/wealth measures to qualify eligible investors are well documented in the recommendation which revisits the definition and suggests approaches to improving it, including among other things:
