To invest in domestic hedge funds, a natural person must be an “accredited investor.”  The term “accredited investor” is defined Rule 501 of Regulation D, the private placement safe harbor promulgated under Section 4(2) of the Securities Act of 1933, as amended.  If a natural person satisfies either of two tests in Rule 501, that person is an “accredited investor.”  Those tests are the income test and the net worth test.  Under the income test, a natural person is an accredited investor if he or she had individual income in excess of $200,000 in each of the two most recent years or joint income with his or her spouse in excess of $300,000 in each of the those years, with a reasonable expectation of reaching the same income level in the current year.  Under the net worth test, a natural person is an accredited investor if he or she has a net worth of at least $1 million.  Dodd-Frank did not modify the income test, but did modify the net worth test.  Specifically, Dodd-Frank modified the net worth test by providing that a natural person may no longer include the value of his or her primary residence in determining whether he or she has a net worth of at least $1 million.  (Prior to enactment of Dodd-Frank, natural persons were allowed to include the value of the primary residence in making the net worth calculation.)  On July 23, 2010, the SEC issued guidance providing that in calculating net worth, a natural person may exclude the amount of any indebtedness secured by his or her primary residence up to the fair market value of the primary residence, but must include (that is, subtract from) net worth any indebtedness secured by his or her primary residence in excess of the fair market value of the primary residence.  We analyze the modified accredited investor definition, and explain why its impact on hedge funds may be muted.