January 7, 2020
January 7, 2020 An obvious goal of securities rules and laws is to expand and provide greater capital formation possibilities. This can be accomplished in the critical private investment fund market through the combination of the redefinition of an accredited investor as well as changes to the Section 3(c)1 exemptions imposed on “investment companies” under the Investment Company Act of 1940. I have previously made comments related to the accredited investor definition specifically that it should expand the definition based on education, degree or qualifications such as possessing a CPA, CFA, CAIA, MBA, JD, or other masters level degree in business, accounting, economics or law. In addition, there ought to be a junior level or Tier 2 Accredited Investor, who earn a minimum of $100,000 per year or have a $500,000 or greater net worth. Tier 2 Accredited Investors would be restricted to a dollar amount per year, say $50,000, that could be invested in Reg D private placements per year. Although not related to the accredited investor definition, I believe that the exemptions from the requirements imposed on “investment companies” under the Investment Company Act of 1940 under Section 3(c)1 which limits the number of investors to 100, should be increased to 500 investors. The 100 person limit serves no purpose other than to limit the potential amount of capital that can be raised. The combination of allowing 500 investors (not just 100 investors) to invest in investment companies along with a redefinition of an accredited investor to be more inclusive based on credentials and adding a limited junior level accredited investor will allow the private investment fund market to expand and provide greater capital formation possibilities. Alan Donenfeld [redacted]