Financial Reform Act Changes Affect Angels & Entrepreneurs
The financial reform bill - now known as the Dodd-Frank Wall Street Reform and Consumer Protection Act - became law on July 21st when President Obama signed the act.
There are two sections in the approved legislation of particular interest to angels:
* Section 413, Adjusting the Accredited Investor Standard (pages 202-203)
* Section 926, Disqualifying Felons and Other "Bad Actors" from Regulation D Offerings (page 476)
The final legislation removed the provisions that concerned ACA related to Regulation D - so there is no 120-day waiting periods for approval of offerings and no patchwork of different state regulations for entrepreneurs raising capital.
Instead, Section 926 adds more abilities for regulators to stop Regulation D private offerings from "bad actors." The final act also eliminated automatic inflationary increases to the definition of "accredited investor" that would have decreased the number of angels in angel groups by about 60 percent (based on source data from the "Returns of Angels in Groups" academic study).
However, Section 413 does include compromise language for net worth requirements, which stay at $1 million but exclude primary residence from the calculation.
IMPORTANT: The change in the net worth definition for accredited investors is effective right now. Securities and Exchange Commission staff have been quoted that the new standard is in place on the date of the enactment of the law (which happened July 21st.)
More information about the efforts to ensure improvements to the original bill can be found on the Angel Capital Association website, where this article originally appeared. Click here.