SEC Raises Hedge Fund Minimum to $2.5 Million

In a move that it says is designed to protect investors, the SEC voted December 13 to raise the asset accreditation minimum for investors in investments such as hedge funds, private equity, and venture capital from $1 million to $2.5 million. Under the proposed rule, investors are not allowed to count real estate, such as their homes, toward the $2.5 million minimum. SEC Chairman Christopher Cox told reporters the day before the December 13 meeting that concerns about the “retailization” of hedge funds prompted the SEC to raise the accredited investor standard, which has been stuck at $1 million since 1982.

The SEC also voted for an antifraud provision under the Investment Advisers Act of 1940 that would make it “fraudulent, deceptive, or manipulative…for an advisor in a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool.”