Tuesday, January 25, 2011

Washington State Accredited Investor Definition Further Excludes Indebtedness Secured by Primary Residence

Washington State became the first jurisdiction to adopt by rule on January 21, 2011 the Dodd-Frank Act’s amendment to the “accredited investor” definition that excludes the value of a natural person’s primary residence from their net worth calculation if the net worth exceeds $1 million at the time of their purchase of securities. The Washington Securities Division simultaneously effected by interpretive statement an SEC-adopted further exclusion from net worth for the amount of the natural person’s indebtedness secured by their primary residence up to its fair market value, along with an SEC-adopted liability deduction from net worth for the amount of the natural person’s indebtedness secured by their primary residence that exceeds its fair market value. Federal and state securities practitioners submitted comments to the SEC that the Dodd-Frank Act exclusion did not take into account the vast majority of investors having a mortgage on their primary residence rather than owning the property free and clear.

For more information please see Interpretive Statement #23 at http://www.dfi.wa.gov/sd

1 comment:

William Carleton said...

Jim, have you seen the proposed rule from the SEC yet today? Presumably it is just on the net worth / mortgage issue . . .