House of Representatives Pass Several Bills to Improve Access to Capital, Including Accredited Investor Definition Fix

The US House of Representatives has passed several bills designed to improve access to capital and to level the playing field for retail investors. The legislation will now move over to the Senate for consideration and, perhaps, then move to the White House to be signed into law.

The legislation includes:

  • H.R. 2797, the Equal Opportunity for All Investors Act
  • H.R. 2796, the Promoting Opportunities for Non-Traditional Capital Formation Act,
  • H.R. 2795, the Enhancing Multi-Class Share Disclosures Act
  • H.R. 2792, the Small Entity Update Act

The Equal Opportunity for All Investors Act aims to address the shortcomings of the current definition of an accredited investor. As it stands today, the definition is based on a wealth metric where an individual must earn over $200,000 a year or have a net worth of over $1 million – not counting a primary residence. If you are married, the income hurdle increases to $300,000. The definition completely ignores business acument or sophistication – something that cannot be measured by a salary.

Representative Ann Wagner, Chair of the Subcommittee on Capital Markets, commented on the bill:

“H.R. 2797 represents a thoughtful approach to expanding the ‘accredited investor’ definition to include individuals who are certified through an examination established by the SEC and administered by FINRA. Under this bill, if you can demonstrate competency with these types of investments through an exam, then you qualify as an ‘accredited investor… by expanding the pathways to qualify as an ‘accredited investor’ beyond wealth tests, this bill modernizes the outdated definition that has inappropriately sidelined sophisticated-but-not-wealthy individuals from high-growth asset classes historically reserved for the wealthiest individuals.”

The legislation garnered solid bi-partisan support in the House as members have come around to the fact that the majority of the population has been disenfranchised for years – blocked – from participating in some of the most promising investment opportunities issued under Reg D.

Ranking member on the House Financial Services Committee, Maxine Waters, touted passage of the bill in an email she distributed today. It is interesting to note that the Securities and Exchange Commission, under the leadership of Chair Gary Gensler, was working in opposition to the ambitions of the accredited investor bill.

The vote on the bill was 383 to 18.

The Small Entity Update Act would direct the SEC to assess regulatory costs of compliance for small and growing businesses, ensuring that regulations placed on these businesses are not overly burdensome.

The Enhancing Multi-Class Share Disclosures Act seeks to ensure shareholders receive more uniform information in proxy materials without prohibiting multi-class share structures.

The Promoting Opportunities for Non-Traditional Capital Formation Act aims to empower underrepresented and rural small business owners to learn about capital formation opportunities.


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