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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations 2 A general description of the NCUAs regulatory authority that includes, at a minimum:
i If the Issuing Credit Union is undercapitalized or, if the Issuing Credit Union is a New Credit Union, moderately capitalized each as defined in this part, and fails to submit an acceptable net worth restoration plan, capital restoration plan, or revised business plan, as applicable, or materially fails to implement such a plan that was approved by the NCUA, the Issuing Credit Union may be subject to all of the additional restrictions and requirements applicable to a significantly undercapitalized credit union or, if the Issuing Credit Union is a new credit union, a marginally capitalized new credit union; and ii Beginning 60 days after the effective date of an Issuing Credit Union being classified as critically undercapitalized or, in the case of a new credit union, uncapitalized, the Issuing Credit Union shall not pay principal of or interest on its Subordinated Debt, until reauthorized to do so by the NCUA; provided, however, that unpaid interest shall continue to accrue under the terms of the Subordinated Debt Note, to the extent permitted by law; and 3 The risk factors associated with the NCUAs or, if applicable, the state supervisory authoritys, authority to conserve or liquidate a credit union under the Federal Credit Union Act FCU Act or applicable state law.
702.406 Requirements related to the offer, sale, and issuance of Subordinated Debt Notes.

a Offering Document. An Issuing Credit Union or person acting on behalf of or at the direction of any Issuing Credit Union may only issue and sell Subordinated Debt Notes if, a reasonable time prior to the issuance and sale of any Subordinated Debt Notes, each purchaser of a Subordinated Debt Note receives an Offering Document that meets the requirements of 702.408e and such further material information, if any, as may be necessary to make the required disclosures in that Offering Document, in the light of the circumstances under which they are made, not misleading.
b Territorial limitations. An Issuing Credit Union may only offer, issue, and sell Subordinated Debt Notes in the United States of America including any one of the states thereof and the District of Columbia, its territories, and its possessions. This limitation includes a prohibition on non-U.S. investors holding or purchasing Subordinated Debt Notes.

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c Accredited Investors. An Issuing Credit Union may only offer, issue, and sell Subordinated Debt to Accredited Investors, and the terms of any Subordinated Debt Note must include the restrictions in 702.404a10;
provided that no Subordinated Debt Note may be issued, sold, resold, pledged, or otherwise transferred to a member of the board of the Issuing Credit Union, any Senior Executive Officer of the Issuing Credit Union, or any Immediate Family Member of any such board member or Senior Executive Officer. Prior to the offer of any Subordinated Debt Note, the Issuing Credit Union must receive a signed, unambiguous certification from any potential investor of a Subordinated Debt Note. The certification must be in substantially the following form:
CERTIFICATE OF ACCREDITED INVESTOR
STATUS
Except as may be indicated by the undersigned below, the undersigned is an accredited investor, as that term is defined in Regulation D under the Securities Act of 1933, as amended the Act. In order to demonstrate the basis on which it is representing its status as an accredited investor, the undersigned has checked one of the boxes below indicating that the undersigned is:
Any bank as defined in section 3a2
of the Act, or any savings and loan association or other institution as defined in section 3a5A of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state; any investment adviser relying on the exemption from registering with the Securities and Exchange Commission under section 203l or m of the Investment Advisers Act of 1940; any insurance company as defined in section 2a13 of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2a48 of that act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301c or d of the Small Business Investment Act of 1958;
any Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 321 of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee
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benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; A private business development company as defined in section 202a22 of the Investment Advisers Act of 1940;
Any organization described in section 501c3 of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
Any natural person whose individual net worth, or joint net worth with that persons spouse or spousal equivalent, exceeds $1,000,000; excluding the value of the persons primary residence. For the purposes of calculating joint net worth in this paragraph: joint net worth can be the aggregate net worth of the investor and spouse or spousal equivalent; assets need not be held jointly to be included in the calculation;
Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that persons spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment;
An entity in which all of the equity holders are accredited investors by virtue of their meeting one or more of the above standards;
Any entity, of a type not listed in paragraph a1, 2, 3, 7, or 8 of 17 CFR
230.501a, not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
Any natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the Securities and Exchange Commission has designated as qualifying an individual for accredited investor status;
Any natural person who is a knowledgeable employee, as defined in rule 3c5a4 under the Investment Company Act of 1940 17 CFR 270.3c-5a4, of the issuer of the securities being offered or sold where the issuer would be an investment company, as defined in section 3 of such act, but for the exclusion provided by either section 3c1 or section 3c7 of such act;
Any family office, as defined in rule 202a11G-1 under the Investment Advisers Act of 1940 17 CFR
275.202a11G-1: i With assets under management in excess of $5,000,000, ii That is not formed for the specific purpose of acquiring the securities offered, and iii Whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters
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