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CALIFORNIA CORPORATE & SECURITIES LAW

Staff Releases Report on its Review of the Definition of “Accredited Investor”

On Friday, the Securities and Exchange Commission staff published a report of its review of the definition of “accredited investor”.  Congress directed the SEC to review the definition every four years in Section 413(b)(2)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Below are the staff’s recommendations:

  • The Commission should revise the financial thresholds requirements for natural persons to qualify as accredited investors and the list-based approach for entities to qualify as accredited investors. The Commission could consider the following approaches to address concerns with how the current definition identifies accredited investor natural persons and entities:
    • Leave the current income and net worth thresholds in place, subject to investment limitations.
    • Create new, additional inflation-adjusted income and net worth thresholds that are not subject to investment limitations.
    • Index all financial thresholds for inflation on a going-forward basis.
    • Permit spousal equivalents to pool their finances for purposes of qualifying as accredited investors.
    • Revise the definition as it applies to entities by replacing the $5 million assets test with a $5 million investments test and including all entities rather than specifically enumerated types of entities.
    • Grandfather issuers’ existing investors that are accredited investors under the current definition with respect to future offerings of their securities.
  • The Commission should revise the accredited investor definition to allow individuals to qualify as accredited investors based on other measures of sophistication.  The Commission could consider the following approaches to identify individuals who could qualify as accredited investors based on criteria other than income and net worth:
    • Permit individuals with a minimum amount of investments to qualify as accredited investors.
    • Permit individuals with certain professional credentials to qualify as accredited investors.
    • Permit individuals with experience investing in exempt offerings to qualify as accredited investors.
    • Permit knowledgeable employees of private funds to qualify as accredited investors for investments in their employer’s funds.
    • Permit individuals who pass an accredited investor examination to qualify as accredited investors.

The entire report weighs in at a 116 pages if you’re interested in a little holiday light reading.

Doesn’t the SEC staff know that “data” is a plural noun?

The report consistently used the word “data” as a singular noun.  Below are just a few examples from the report:

  • Underlying data in the Unregistered Offerings White Paper was obtained from Form D filings.
  • The income and net worth data underlying the number of qualifying households is estimated in 2015 dollars.
  • The Unregistered Offerings White Paper data shows that Regulation D offerings occur with far greater frequency than any other offering markets surveyed.
  • The underlying household data for this analysis was obtained from the Federal Reserve Board’s Survey of Consumer Finances (the “SCF”) for 1983 and 2013.

The word “data” is a confusing word to English speakers who typically form plurals by adding “s” (e.g., “commissioner” and “commissioners”).  The word “data” is derived from the Latin word “do”, which means to give or furnish (“donate” is also derived from “do”).  But how does one get from “do” to “data”?  Most Latin verbs have four principal parts – the first person singular, the infinitive, the perfect, and the passive participle.  The four principal parts of “do” are “do” (I give), “dare” (to give), “dedi” (I have given), and “datum” (having been given).  In Latin, neuter plurals are often created by with the suffix “a”.  Thus, “data” is the plural, perfect, passive, neuter, nominative participle form of “do”.

A case for the plural meaning of “data” can also be made.  The plural recognizes that a set of information is composed of many constituent pieces of information.

With the advent of computers, “data” is often used as a singular noun because it refers to the information as unit rather than the constituent elements.  Thus, continuing to insist on the plural form may seem priggishly pedantic.  However, economic, scientific and technical writers still honor the plural nature of the word.

 

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