State securities regulators are opposing the Securities and Exchange Commission’s proposal to expand the definition of an accredited investor, saying the new definition would fail to adequately protect individual investors.
In a 15-page comment letter to the SEC, Christopher Gerold, president of the North American Securities Administrators Association, who also heads the New Jersey Bureau of Securities, wrote that the proposal shows “little regard for its potential adverse effects on retail investors and the public markets. The Commission should not move forward with the proposal as currently presented.”
The SEC proposal expands the number of people and organizations who qualify as accredited investors, allowing them access to private securities offerings, hedge funds and private equity funds by creating new categories of qualifying individuals and entities based on what the SEC calls their “requisite ability to assess an investment opportunity.”
Those individuals include licensed general securities representatives (with a Series 7 license); licensed investment adviser representatives (Series 65); licensed private securities offerings representatives (Series 82); and knowledgeable employees of private funds, such as hedge funds, venture capital funds and private equity funds, even when they do not meet the income or net worth standards in the accredited investor definition.