As we had discussed in our June 29, 2010 Bulletin, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) revised the definition of an “accredited investor” under Regulation D of the Securities Act of 1933 and directs the SEC to regularly review, and as appropriate, adjust, the standards of the accredited investor definition.

Issuers conducting a private offering under Rule 505 or 506 of Regulation D directed solely at accredited investors do not need to provide the expansive information otherwise required under Regulation D of the Securities Act, and such investors do not count towards the 35-person limit for such offerings. Under Dodd-Frank, the $1 million net worth standard for determining “accredited investor” status was adjusted to exclude the value of a potential investor’s primary residence, effective July 21, 2011, the date Dodd-Fran was enacted. Subsequently, the SEC’s Division of Corporation Finance issued guidance clarifying that in calculating a potential investor’s net worth, any debt (such as a mortgage) on the residence, up to the fair market value of the residence, could also be excluded from the net worth calculation, but any debt over the fair market value had to be deducted from the net worth figure (in other words, included in the net worth calculation)....