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4.4 Increased Net Worth Thresholds for Private Fund Investors

<< Title IV Overview

4.4 Increased Net Worth Thresholds for Private Fund Investors

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4.4.       Increased Net Worth Thresholds for Private Fund Investors.  The manner in which natural persons will qualify as investors in private funds will be modified in some respects.  In addition, the SEC and the Comptroller General are required to conduct reviews or studies related to the net worth thresholds required of certain investors in private funds. 

4.4.1.    Adjustment of Accredited Investor Threshold.  The net worth requirement for a natural person (or joint net worth with the spouse of that person) to qualify as an accredited investor under the Securities Act of 1933, as amended ("Securities Act"), shall exclude the value of the primary residence of such natural person and shall, for the 4-year period commencing on the date of enactment of the Act, be $1 million.  At the end of such 4-year period, such net worth requirement must be in excess of $1 million. [§413]  In addition, the SEC is authorized to undertake a review of the definition of the term "accredited investor" as such term applies to natural persons to determine whether the requirements of the definition (other than the net worth test mentioned above) should be adjusted or modified and, upon completion of the review, may adjust such requirements of the definition as it deems appropriate.  Not earlier than the fourth anniversary of the enactment of the Act, and not less than once every 4 years thereafter, the SEC must undertake a review of the accredited investor definition in its entirety as it relates to natural persons and shall, upon the completion of each such review, adjust such requirements of the definition as it deems appropriate. [§413]  In addition, the Comptroller General is required to conduct a study on the appropriate criteria for determining accredited investor status and eligibility to invest in private funds and shall submit a report to Congress on the results of such study within 3 years of the date of enactment of the Act. [§415] 

4.4.2.    Adjustment of Qualified Client Threshold.  With respect to any dollar amount threshold used in determining whether a person is a "qualified client," the SEC shall be required no later than 1 year after the date of enactment of the Act, and every 5 years thereafter, to adjust for the effects of inflation on such test (rounding up to the nearest $100,000). [§418]