The Financial Technology Association (FTA) has outlined its opinion as to what the House Financial Services Committee should pursue regarding ambitious portfolio off legislation that aims to improve access to capital while enabling access to opportunities for smaller investors.
Recently, the Committee held a hearing addressing many different issues alongside a slew of bills. Following several years of Democrat control of the Committee, which focused more on investor protection issues and a social agenda, Republicans aim to enact bills that support smaller firms and retail investors. In a letter addressed to the Chairman of the Committee, French Hill, the FTA provided feedback as requested by the Committee.
Penny Lee, President and CEO of the FTA, said that when American investors invest in financial innovation, we invest in the American economy.
“We applaud the House Financial Services Committee for considering bipartisan efforts to increase access to capital and investment opportunities and strengthen our public and private markets. These policies will help more Americans benefit from investment opportunities previously only available to the wealthy.”
The FTA outlined their preferred goals for Congress:
- Modernizing the Accredited Investor Definition, which would allow sophisticated, but not necessarily “wealthy” individuals to responsibly participate in private markets. Wealth alone is not an accurate measure of financial acumen, and expanding pathways for individuals to qualify as accredited investors is essential.
- Increasing retail investor participation in private markets through opportunities like crowdfunding, pooled investment structures, and secondary market development while maintaining appropriate investor protections. Retail investors face significant barriers to accessing private markets, as investment opportunities are largely limited to institutional and high-net-worth investors.
- Cutting red tape for startups and small businesses to access capital by increasing the size and investor limits for qualifying venture capital funds and expanding the definition of qualifying venture capital investments to include fund-of-fund investments and secondary transactions. Expanding investment pathways through pooled investment structures and secondary markets could help close the gap in access to capital.
- Modernize retirement policy to encourage long-term savings by expanding Roth catch-up contributions and building on provisions in the SECURE 2.0 Act of 2022 that expanded automatic enrollment in retirement plans and allowed student loan payments to qualify for 401(k) matching contributions. In addition, including digital investment advisory models in retirement plans and ensuring these receive the same standing as traditional investment options could further reduce costs and increase accessibility.
- Encourage the use of responsible AI to further enhance investor services and offerings, which can improve accessibility, lower costs, and promote sound investment decision-making to the great benefit of investors and markets.
The letter is available below.