Net Worth Standard for Accredited Investors: SEC Proposes Amendments to the Definition of “Accredited Investor” Under the Securities Act Pursuant to Dodd-Frank Section 413(a)

Sullivan & Cromwell LLP - February 3, 2011

Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the definitions of “accredited investor” in Regulation D and Rule 215 under the Securities Act to exclude the value of a person’s primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million. This change to the net worth standard was effective upon enactment of the Dodd-Frank Act, but Section 413(a) also requires the SEC to revise its Securities Act rules to reflect the new standard. On January 25, 2011, the SEC proposed rule amendments to make this revision.