Accredited Investors & New Disclosure Rules

Accredited Investors & New Disclosure Rules

SEC recently altered certain rules for public company disclosures and paved the way for accredited investors to get increased access to the private capital market. In this respect, the amendments to Regulation S-K will result in simultaneous alterations to Public company disclosures of the description of business (Item 101), legal proceedings (Item 103), risk factors (Item 105) and will be effective from 30 days after publication in the Federal Register. These new disclosure requirements are aimed to facilitate an understanding of individual registrant’s business, financial condition, and prospects.

An “accredited investor”, initially for SEC, stood for investors having limited private capital market participation (meeting specific income or net worth tests).

The amended definition will assist those investors who meet defined measures of professional knowledge, experience, or certifications, however, may not pass the existing tests for income or net worth. Holders of SEC Series 7, Series 65, and Series 82 licenses now qualify as accredited investors. The amendments also include other changes and clarifica­tions for accredited as well as other groups of investors.

SEC has also invited public feedback on additional certifications, designations, or credentials that can be proposed for the new disclosure rules.

■ Alterations in Savings and Loan Disclosures: Statistical disclosures for bank/savings/loan registrants being pro­vided to investors will stand to get altered post implementation of new disclosure norms. The amendments are in the light of changes in the banking sector since last 3 decades and eliminate a couple of duplicate disclosure items under SEC, U.S. GAAP or IFRS and also replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies, with updated disclosure requirements in a new subpart of Regulation S-K.

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