Exploring the Impact of Annual Investor Accreditation Requirements

“As amended, Rule 12g-1 provides that an issuer is not required to register a class of equity securities pursuant to Section12(g)(1) if on the last day of its most recent fiscal year the class of equity securities was held of record by fewer than 2,000 persons or 500 persons who are not accredited investors (as such term is defined in Securities Act Rule 501(a)), determined as of such day rather than at the time of the sale of the securities”

When the SEC recently issued rules to further implement the JOBS Act, the changes to Rule 12g-1 imposed an annual determination of accredited investor status as originally proposed by the SEC. As a result, any issuer with between 500 and 2,000 investors must have a reasonable belief as to the accredited status of its investors annually, as opposed to the long held standard of establishing such reasonable belief only at the time of the investment.

An annual accreditation analysis carries with it widespread consequences.

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Panelists
Stan Eigenbrodt, Chief Legal Officer | Provasi Capital Partners
Kristin Rice-Gonzalez, Associate | Baker McKenzie
Greg Mesack, Managing Director | Eris Group

Moderator
Ryan Kretschmer, Legal Counsel | Walton International Group