![Corporate-people-crowd-walk-walker-office-business-center](https://www.nortonrosefulbright.com/-/media/images/nrf/hero/corporate-people-crowd-walk-walker-office-business-center.jpg?w=265&revision=3d04236d-6ad6-4a07-850d-1f6b56a234e9&revision=5249001779897387904&hash=02AF8A7E35F1B67A8E90E42D1EA1AE7D)
Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
On August 26, 2020, the US Securities and Exchange Commission (SEC) adopted amendments to expand the scope of the "accredited investor" definition, allowing a greater pool of investors to access the private capital markets. The amendments add new categories of qualified natural persons who meet certain professional knowledge or certification requirements and expand the list of entities that qualify.
Previously, investors were considered accredited if they had at least US$200,000 in annual income (or US$300,000 household income) or if they had US$1 million in net assets, not counting their primary residence. These thresholds are not adjusted for inflation and the SEC did not amend these 38-year-old thresholds – another factor in growing the pool of investors who will qualify as accredited over time.
Specifically, the amendments to the accredited investor definition:
The SEC noted the addition of the new category of certain credentialed individuals provides the SEC with flexibility to further expand and add certifications or credentials in the future. This is likely to prompt other "knowledgeable" groups to push the SEC to expand the category even further. Among those referenced by commenters were individuals qualifying as a CPA, CFA, CMA and MBA. It is yet to be seen how the SEC will draw the line and will distinguish one qualification from another.
Additionally, the SEC amended the definition of "qualified institutional buyer" in Rule 144A to:
The amendments are the result of years of examination of the private capital markets and lobbying by major industry players. In December 2015, the SEC released a staff report on the history of the accredited investor definition, alternative approaches, impacts and recommendations for modifying the existing definition. In June 2019, the SEC released its "Concept Release on Harmonization of Securities Offering Exemptions" requesting comments on various proposals to amend the accredited investor definition. Taking into account the multitude of comments received, the SEC formally proposed amendments to the definition in December 2019. Continuing their efforts to modernize and simplify investor regulations, the SEC also proposed amendments to the exempt offering framework in March 2020, which if passed, would allow greater access to capital for issuers and greater access to investment opportunities for investors.
The current amendments passed by a 3-2 vote along party lines. Commissioner Elad Roisman and Commissioner Hester Peirce both praised the amendments, but noted this was only a first step, and there is still work to be done. Commissioner Roisman specifically pointed out how narrow the new category of financial sophistication is being construed: "… members of the expert staff we have here at the SEC, who review registration statements for material disclosure and investigate potentially fraudulent activity in our markets, will not qualify as accredited investors because the eligibility criteria are still very limited. It certainly seems a strange outcome that so many individuals who enforce our securities laws and regulate financial markets are not considered sophisticated enough to invest in those very same markets." Commissioner Peirce had similar reservations and noted the amendments were "rooted in a recognition that wealth and income are not always great proxies for an investor's sophistication."
Commissioners Allison Herren Lee and Caroline Crenshaw, the two dissenting votes, released a joint statement criticizing the amendments. They cautioned against the continuing expansion of the private markets and warned of the risks this expansion may pose for investors, particularly seniors. They also highlighted the failure to update the 38-year-old income and wealth thresholds and to have such thresholds adjusted for inflation going forward, which would have the effect of reducing the number of accredited investors and, arguably in the majority view, further restrict and contract private capital markets in the US.
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Publication
The EU Foreign Subsidies Regulation, or FSR, is intended to prevent or remedy distortions of the EU internal market caused by “foreign” – meaning non-EU – subsidies benefitting companies active in the EU.
Publication
The English High Court has given its judgment in the legal battle between FW Aviation (FWA) and VietJet Aviation Joint Stock Company (VietJet). This case revolved around the enforcement of leasing agreements for four Airbus aircraft and the alleged interference by VietJet in the aircraft’s repossession in Vietnam.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright LLP 2023