An SEC proposal to provide tougher qualification standards (having at least $2.5 M in investments exclusive of equity in a home) for individuals investing in private hedge funds and other private alternative investments has proved to be so controversial that the SEC may have to alter the plan or abandon it altogether. Or at least that is the assessment of industry observers about the proposal, which was first introduced in December, 2006 by the SEC.
The SEC last week approved another part of the proposal asserting its anti-fraud authority over all pooled-investment funds, including hedge funds, private-equity funds and mutual funds. However, the SEC indefinitely delayed action on the part of that original proposal that would raise wealth qualifications for individual investors in private-investment pools.
Past that, at least so far, the SEC is being close mouthed about its intentions.
One possibility is an adoption of a middle ground standard higher than the current standard [>$1m net worth inclusive of home or past 2 yrs income >$200K/yr ($300K with spouse) with expectation of reaching that level in current year] but lower than the proposed $2.5M or more in investments standard. For example, some have speculated that the SEC might use $1.5M net worth prong of the "qualified client" standard currently used to determine when an SEC registered investment adviser can charge performance fees.
Personally, I would not declare the increase in individual "accredited investor" standards dead yet - not by any means. Abandonment seems far less likely than, perhaps, some toning down of the proposed standards.
