On January 31, the Committee submitted a comment letter to the Securities and Exchange Commission (the “SEC”) regarding the proposed rule to amend the definition of “accredited investor” under the Securities Act of 1933, as amended (the “Proposal”).

The Proposal would amend the definition of “accredited investor” to, among other things: (i) add new categories for natural persons with certain professional certifications, designations or academic credentials from an accredited educational institution; and (ii) add new categories for certain entities with at least $5 million in assets. The SEC released the Proposal in connection with its efforts to “simplify, harmonize, and improve the exempt offering framework under the Securities Act of 1933 to promote capital formation and expand investment opportunities while maintaining appropriate investor protections.”

In November 2018, the Committee released a report (the “Committee report”) recommending that the SEC permit non-accredited investors to invest in public closed-end funds that invest more than 15% of their assets in private equity funds (“closed-end funds of private equity funds”). The Committee report sets forth the policy rationale for expanding investor access to closed-end funds of private equity funds.

The Committee notes that, according to the Proposal itself, “recent research has shown that investments in funds of private equity funds can outperform public markets.” However, the Proposal does not otherwise address the Committee’s recommendation. The Committee has taken the opportunity to reaffirm our recommendation contained in the Committee report.

The Committee’s letter can be found here.