|Today, August 26, 2020, the Securities and Exchange Commission (SEC) published Final Rule Amending the "Accredited Investor" Definition (RIN 3235-AM19). In this final rule the SEC adopted amendments to update and improve the definition of Accredited Investor and Qualified Institutional Buyers (QIB).|
The amendments expand the list of entities that may qualify as accredited investors, including Indian Tribes and entities formed under tribal law, that own investments in excess of $5 million USD. This is captured under Rule 501(a)(9).
By expanding and including Indian Tribal Governments as Accredited Investors under Rule 501(a)(9) it also provides further access for Indian Tribal Governments to be considered a QIB as outlined in Rule 144A. Indian Tribal Governments would have to meet the $100 million USD threshold in order to qualify as a QIB. This is a significant development and will expand Indian Country's access to the commercial paper markets.The effective date is sixty (60) days after publication in the Federal Register.
NAFOA was supportive of adding this new category to include Indian Tribal Governments and reiterated our support for tribal sovereignty and self-governance to engage in the private market in our March 2020 Comment Letter to the SEC regarding these proposed changes. As stewards of our lands and people since time immemorial we welcome the SEC's action today to finally include Indian Tribal Governments as Accredited Investors and QIBs.
The SEC Chairman Jay Clayton and the Commissioners have taken the time to listen and engage Indian Country to develop rules that both support sovereignty and provide basic investor protections for tribal governments. NAFOA remains committed to work with the SEC and other stakeholders across Indian Country as the Final Rule is implemented.
Accredited Investor Background
Qualifying as an Accredited Investor, as an individual or an institution, is significant because Accredited Investors may, under SEC rules, participate in investment opportunities that are generally not available to non-accredited investors, including certain investments in private companies and offerings by certain hedge funds, private equity funds, and venture capital funds.
This is significant because of the potential for capital formation and investment growth. In 2018, the estimated amount of capital, both equity and debt, reported as being raised in Regulation D, Rule 506(b), offerings was $1.7 trillion USD while registered offerings raised $1.4 trillion USD. Accredited Investors are critical to providing capital for the Regulation D Market.
However, these investment opportunities may be subject to investment risks not associated with registered offerings and require extensive due diligence.
|"We are grateful that the SEC has moved forward to support Indian Tribal Governments' ability to exercise their sovereignty and achieve self-determination by fully participating in the private capital markets. The historic and long awaited actions of the SEC will help to strengthen and grow tribal economies across the nation."|
— Cristina Danforth, Board President, NAFOA
|For any other questions or concerns, please contact Emery Real Bird, Financial Management Policy Specialist, at Emery@nafoa.org or (202) 945-7750.|