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SEC to Change Definition|of ‘Accredited Investor’

WASHINGTON (CN) - The potential pool of "accredited investors" eligible to buy shares in private offerings, such as hedge funds, will likely decrease under rules proposed by the Securities Exchange Commission.

The rules would exclude the value of the investors' primary residence in calculating their net worth.

Under current regulations, an accredited investor must have a net worth greater than $1 million, the determination of which may include the fair market value of their primary residence.

The SEC's proposed language would exclude the amount by which the fair market value of an investor's home exceeds the debt on the property in determining the investor's net worth.

The proposed change is mandated by provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act meant to shield small investors from unwarranted risks.

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