Representatives Introduce Legislation to Expand “Accredited Investor” Definition, Again
Representatives French Hill (R-AR) and David Schweikert (R-AZ) have introduced the Fair Investment Opportunities for Professional Experts Act (H.R. 4762) to expand the definition of accredited investor to allow Americans who have relevant education, professional expertise, or other similar credentials to invest in private offerings.
Representatives French Hill (R-AR) and David Schweikert (R-AZ) have introduced the Fair Investment Opportunities for Professional Experts Act (H.R. 4762) to expand the definition of accredited investor to allow Americans who have relevant education, professional expertise, or other similar credentials to invest in private offerings.
Most small companies raise start-up or expansion funds in the private market where they can sell securities to “accredited investors” due to the significant costs and barriers to raising capital in the U.S. public markets.
Currently, all accredited investors must have an individual income of $200,000, a joint income of $300,000, or a net worth that exceeds $1 million – not including a primary residence.
“The ability to participate in a private offering should not be limited to individuals that can pass an arbitrary wealth test set by the government and, instead, should be afforded to individuals that demonstrate a strong understanding of the offering,” said Rep. Hill. “This will provide both greater investment opportunities for more Americans and will enable entrepreneurs to create more jobs.”
The Fair Investment Opportunities for Professional Experts Act expands the definition to allow access to private offerings for individuals who have demonstrated an understanding of the subject matter related to an offering. This could include licensed financial services professionals and those with professional knowledge relating to a particular investment.
Last year, the House Financial Services Committee passed a previous version of the legislation (H.R. 1585) with overwhelming bipartisan support, and by a voice vote in the full House. It did not, however, receive consideration in the Senate due to a tight legislative calendar and other legislative priorities at that time.
Similar obstacles, with the addition of the ongoing impeachment inquiry, may prevent the bill from moving forward – although industry trade groups remain optimistic.
“I think it’s going to be tough,” said Anya Coverman, senior vice president of government affairs and general counsel at the Institute of Portfolio Alternatives, an industry trade group. “We believe this is a bipartisan issue. Hopefully, there will be a push to put together a package in the Senate Banking Committee that this bill will be a part of.”
In June, the Securities and Exchange Commission sought public comment on whether private placement rules should be relaxed. The SEC took comments for 90 days on “ways to simplify, harmonize and improve the exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and to promote capital formation.”
