New Rules for Accredited Investors- Home Equity doesn't count

http://angelsoft.net/blog/2010/08/03/sec-revises-accredited-investor-standard/

In the Dodd-Frank Act enacted on July 21, 2010, the Securities and Exchange Commission has been instructed to amend the net worth standard for an “Accredited Investor”. The new standard excludes your primary residence as part of the $1 million net worth threshold.

Accredited Investor status is based on either net-worth or annual income. Before the Dodd-Frank Act, an accredited investor was required to have at least $1 million in assets, $200k in personal annual income or $300k in joint-spousal annual income. With the Dodd-Frank Act in place, an accredited investor must have at least $1 million in assets besides the value of your primary residence or meet the annual income requirements.

The logic for the change is that a primary residence is not truly a liquid asset as it is depended upon for the basic need of shelter. While it is unfortunate that some accredited investors have been stripped of their status, the damage is far less than it would have been with the original proposal to adjust all requirements for inflation since 1982!



Comments

[Richard Stooker]

Much as I detest Barney and Dodd, and don't share their general view that one role of government is to protect people from their own stupidity, I can't get worked up over this change.

It's good that there are wealthy people willing to take big risks on small businesses and real estate projects, but these days $1 million is not enough to qualify as real wealth.

And the Bernie Madoff case proves that inheriting wealth or building a successful business doesn't mean you're smart about investing. His victims proved quite willing to deceive themselves into believing his false promises of outlandish returns. However, as much as they lost, I doubt many of them are now living on welfare.

If you have under one million to invest, there're plenty of publicly traded stocks and bonds you can invest in.