SEC Panel Re-Defines the Threshold for Private Placement Investments

Posted on October 24th, 2014 at 12:54 PM
SEC Panel Re-Defines the Threshold for Private Placement Investments

From the Desk of Jim Eccleston at Eccleston Law Offices:

The SEC Investor Advisory Committee (IAC) voted to broaden the definition of sophisticated investors who can participate in private offerings. The current threshold requires individuals that earn at least $200,000 annually or have a net worth of $1 million excluding their primary residence.

The IAC has asserted that the current threshold “oversimplifies the factors that determine whether an individual truly has the wealth and liquidity to shoulder the potential risks of private offerings.”  For example, this threshold doesn’t provide adequate protection for investors whose net worth is based on a retirement nest egg or on illiquid holdings, such as farmland.

As a result, the IAC is considering two approaches to implement the change.  One approach is to remove the income and net worth floors and instead consider a definition of sophisticated investor which takes into account an individual's education, professional credentials (such as the Chartered Financial Analyst designation or a Series 7 license), and investment experience.

Another approach is to maintain income and net worth standards, but limit participation in private placements to a certain percentage of an investor's income or assets.

Additionally, the IAC is considering whether to shift responsibility for verifying accredited investor status from the securities issuers to third parties, who could include brokers, investment advisers, accountants and attorneys.

Finally, the IAC recommended that the current limit on the number of non-accredited investors who can participate in private offerings should remain intact but that non-accredited investors should receive stronger protections.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

Tags: SEC IAC, SEC, Securities and Exchange Commission, IAC, Investor Advisory Committee,

Return to Archive



Jim, Stephany and the whole team were a God send.  We felt like we were put into a situation where we had no advocate. Jim’s team came in with a strong, well laid out strategy on how to get our story heard. Where our outside compliance company had no ability to help, our Broker Dealer was impenitent, and the regulators were aggressive pursuing vague rules, Jim came like a barricade against an assault we did not understand. Though you pay member dues to be affiliated with FINRA and a B/D, you have no voice. The only thing that is truly heard in this un-level playing field is a bulldog’s bark like Jim’s. I would encourage anyone to call Jim and his team to find a real ally in the tough and complicated world of securities regulation. They are truly the best.

Greg P.


October 27, 2021
Former LPL Advisor Suspended For Completing 22 Trades Absent Client Consent

The Financial Industry Regulatory Authority (FINRA) has suspended and fined a former LPL advisor who allegedly completed 22 trades on behalf of a client without obtaining written consent. FINRA has issued a $5,000 fine and has suspended Michael Hartlett for 10 days.

October 26, 2021
Former Advisor Fails To Reverse Bar After Alleged $1 Million Theft From RBC

A former RBC Wealth Management advisor lost his bid to reverse an industry bar, according to an appellate decision issued by the Financial Industry Regulatory Authority (FINRA).

October 25, 2021
Firms Walk Thin Regulatory Line In Referring Self-Directed Clients To Advisors

While online trading platforms have surged in popularity during the pandemic, brokerage firms view self-directed investors as a source of new clients.