The Securities and Exchange Commission will complete its unprecedented review of its definition of “accredited investor.” This is the most comprehensive formal study undertaken by the SEC of what characteristics best reflect an individual's ability to make private, unregulated investments. The definition particularly affects emerging companies, which heavily rely on the sale of private securities to raise capital.

“It would affect the angel networks and a lot of smaller software companies looking for investments,” said Armando Castro, a Silicon Valley-based partner in Pillsbury’s corporate and securities technology practice. “It could have a very significant impact on them.”

The crux of the law as it stands today, Castro explained, is an investor's ability to avoid financial ruin in the event that a private stock offering goes sour. “If [investors] are considered wealthy enough, they're not deemed to require the protection of the securities laws,” he added.