New Financial Reforms Signed Into Law: Immediate Change for Accredited Investors in Direct Investment Programs

President Obama Signs Sweeping New Financial Reforms Into Law

Immediate Change for Accredited Investors in Direct Investment Programs

Almost two years after the onset of the credit and banking crisis, President Obama has signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 – one of the most comprehensive financial reform bills enacted since the Great Depression.

Although best known for ushering in reforms to the $600 trillion derivatives industry, to credit-rating agencies, to the mortgage loan industry, to the Federal Reserve System, and establishing a new independent office of consumer protection, together with a 10-member council to monitor the “too big to fail” sectors of the United States financial system, Section 413 of the law has a direct impact upon those involved in the private placement of securities in the United States.

Section 413 (Adjusting the Accredited Investor Standard) is now effective and provides that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of the purchase of a privately placed security, must be more than $1,000,000, excluding the value of the primary residence of such natural person. Additionally, the law grants power to the Security and Exchange Commission, subject to certain guidelines, to engage in an initial review and adjustment and subsequent reviews and adjustments, every four years, of the definitional criteria for accredited investors. All other criteria for determining the accreditation of investors remain unchanged, at this time, by this law.

The Investment Program Association (IPA) was formed in 1985 to provide the direct investment industry with effective national leadership. Over the years, the IPA has successfully championed the growth of these investment products which have increased in popularity with financial professionals and investors alike. Today, the IPA is the leading advocate for the inclusion of direct investments in a diversified investment portfolio. The mission of the IPA is to advance the unique benefits of direct investments. For more information, please contact Kevin Hogan, Executive Director of the IPA at khogan@ipa.com, or visit www.ipa.com.