Accredited Investor Qualifications
Section 413(a) of the Act alters the financial qualifications of who can be considered an accredited investor, and thus a qualified as eligible participant (QEP). Specifically, the revised accredited investor standard includes only the following types of individuals:
1) A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value of such investor’s primary residence;
2) A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those years and a reasonable expectation of reaching the same income level in the current year; or
3) A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer.
Based on this language, it is important to note that the revised accredited investor standard only applies to new investors and does not cover existing investors. However, additional subscriptions from existing investors are generally treated as requiring confirmation of continuing investor eligibility.
On July 27th, 2010, the SEC provided additional clarity regarding the valuation of an individuals primary residence when calculating net worth. In particular, the SEC has interpreted this provision as follows:
Section 413(a) of the Dodd-Frank Act does not define the term value, nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation Pending implementation of the changes to the Commissions rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investors net worth.
http://www.zerohedge.com/print/410025
Out of curiosity, where do you see that this only applies to new investors? I don't see anything in what you posted indicating that previously-qualified investors don't have to meet the new standards to maintain their qualification. (Perhaps that's in some other portion that you didn't post.)