Daily Development for
Thursday, December 11, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

The Reporter for today's DD is Jim Aronoff of Thompson, Hine & Flory, Detroit.

SECURITIES; ACCREDITED INVESTORS; LIMITED LIABILITY COMPANIES: Although not specified in the list of organizations in Rule 501(a)(3) under the Securities Act of 1933, a limited liability company may be treated as an "accredited investor" for purposes of Regulation D. Wolf, Block, Schorr and Solis-Cohen, Fed. Sec. Law Rep. (CCH) 77,336 (SEC 1997). The staff of the Division of Corporate Finance of the Securities and Exchange Commission concluded that although limited liability companies are not specifically referenced in the list of entities that may be treated as "accredited investors" for purposes of Regulation D, there were sufficient similarities to other specified entities to warrant such treatment. It is important to note, however, that a LLC must meet the other requirements of Rule 501(a)(3) to qualify as an accredited investor. Those requirements are: (i) that the entity was not formed for the specific purpose of acquiring the securities offered; and (ii) the entity has total assets in excess of $5 million.

Comment: It probably goes without saying, but both state and federal law require disclosures in connection with securities offerings that most experts believe are almost as extensive as those required in connection with registration statements. You may be able to avoid registration requirements, but not disclosure requirements.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

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