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SEC amends “accredited investor” definition - A comparative look at the positions in US, UK and Hong Kong

  • Hong Kong
  • USA
  • United Kingdom
  • Financial services disputes and investigations


On 26 August 2020, the United States Securities and Exchange Commission (SEC) amended the definition of “accredited investor” in Rules 215 and 501(a) of Regulation D of the Securities Act of 1933 to add new categories of qualifying individuals and entities. In the case of individuals, the new definition will no longer rely on wealth in the form of a certain level of income or net worth as the sole criterion for establishing the financial sophistication of an individual for purposes of qualifying as an accredited investor. The amendments become effective on 8 December 2020.

Other international financial centres have similar regimes for the classification of individual investors. For example the UK has the “elective professional client” and Hong Kong has the “professional investor” classification. Wider access to investment opportunities usually comes at the cost of less stringent authorisation, disclosure and procedural requirements for privately placed investment products and related investor protections for qualifying investors. In our experience, a disgruntled customer will usually make the argument that he/she was mis-classified by the firm, whether as a matter of policy or arising from an abuse of the procedures by relationship managers. It is therefore important for firms and staff to get classification right. This e-bulletin highlights the changes made by the SEC and also considers the positions in the UK and Hong Kong.

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