Raising bar on net-worth requirements

The value of an investor's primary home wouldn't be taken into account when determining whether the individual were an accredited investor, according to a rule proposed by the Securities and Exchange Commission. By excluding the value of a primary residence, the SEC's determination of whether an investor is accredited — they must meet a minimum-net-worth requirement of $1 million — would dovetail with the formula set by the Dodd-Frank Act. Accredited investors can participate in private and limited offerings that are exempt from registration requirements. The $1 million net-worth threshold would apply to an individual or a couple, the SEC said. The commission's proposed rule also would clarify the treatment of a mortgage on the primary residence in figuring out net worth, SEC Chairman Mary Schapiro said in a statement. Although the SEC is accepting public comments on the proposal through March 11, the change really took effect in June when Dodd-Frank was approved. Under another rule that the SEC proposed last week, advisers to hedge funds and other private funds would have to provide regulators with information to help the Financial Stability Oversight Council evaluate the systemic risk that these funds posed. The Commodity Futures Trading Commission proposed a similar measure last week for private-fund managers that register with that regulator. E-mail Liz Skinner at lskinner@investmentnews.com.