The SEC proposed rule amendments on Jan. 25, 2011 to conform the definition of “accredited investor” to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Before the Dodd-Frank Act, the definition of an “accredited investor” under Rule 501 of Regulation D included a natural person with a net worth of at least $1 million, either individually or jointly with such person’s spouse, and included in the calculation of that net worth was the value of such person’s primary residence.  Section 413(a) of the Dodd-Frank Act directed the SEC to amend the definition of “accredited investor” to exclude the value of an investor’s primary residence from the $1 million net worth calculation.  The SEC’s proposal reflects this new requirement and provides clarification on the amount by which an investor’s net worth should be reduced when deducting the value of the primary residence from the net worth calculation. 

The SEC's press release is available here.  The SEC will seek public comment on its proposed rules through Mar. 11, 2011.

OUR TAKE:  To confirm that individual investors qualify as "accredited investors," issuers conducting private offerings must now ensure that an investor's net worth is sufficient without his or her primary residence being included in the net worth calculation.