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Should the SEC Relax Requirements for Accredited Investors?
(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)
In June of 2019, the Securities and Exchange Commission (SEC) issued a concept release asking for comments on ways to simplify, harmonize, and improve the exempt offering framework to promote capital formation and expand investment opportunities while maintaining investor protections. Under the Securities Act of 1933, every offer and sale of securities must be registered with the SEC unless an exemption from registration is available. The release addresses concepts applicable to exempt offerings, including accredited investor qualification. The SEC is interested in whether additional categories should be included as accredited investors, whether financial threshold requirements should be revised, whether alternative sophistication measures should be used to qualify investors as accredited, and whether a broader range of investment opportunities should be made available to non-accredited investors. While the current framework permits non-accredited investors limited access to unregistered offerings, investments in exempt offerings in which non-accredited investors participated represented less than 1% of investment in all exempt offerings in 2018. Below we examine the bull and bear arguments for expanding the definition of an accredited investor.