Bills
| 3.23.22

Should the Definition of “Accredited Investor” be Broadened for Those Who Pass an Exam? (H.R. 2187)

Do you support or oppose this bill?

What is H.R. 2187?

(Updated July 21, 2017)

This bill would revise the Securities and Exchange Commission (SEC) rules under Regulation D to consider a person an accredited investor regardless of income and net worth requirements if the person certifies that they:

  • Is a person described in specified other requirements of Regulation D;

  • Has retained and used the services of certain banks, savings and loan associations, insurance companies, registered brokers or dealers, or other entities and their employees to make an investment decision;

  • Is licensed as an accredited investor by the Financial Industry Regulatory Authority (FINRA) after completing an exam administered by FINRA using the SEC’s criteria.

The SEC would establish criteria for FINRA to use in administering the exam to accredited investors who don’t meet Regulation D’s income and net worth requirements.

Argument in favor

People who have experience in the financial services industry or have passed an SEC exam should be considered accredited investors, as it will lead to increased investment and economic growth.

Argument opposed

The SEC has regulations defining who can be considered an accredited investor for a reason, and that’s because not all investors have the financial resources or expertise to make risky investments.

Impact

People who would be considered accredited investors under the revised definition, FINRA, and the SEC.

Cost of H.R. 2187

The CBO estimates that implementing this bill would cost less than $500,000 over the 2016-2020 period.

Additional Info

In-Depth: Accredited investors are considered to be more financially sophisticated than typical investors by federal regulators because of the financial resources at their disposal. Currently, the requirements to become an accredited investor include satisfying at least one of the following criteria:

  • Earn an individual income of more than $200,000, or a joint income of $300,000 in each of the last two years and reasonably expect to maintain that income level;

  • Have a joint or individual net worth exceeding $1 million;

  • Are a general partner, executive officer, director, or some related combination for the firm that is issuing securities.

The House Financial Services Committee passed this legislation by a vote of 54-2.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user harshlight)