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Regulation and Compliance > Legislation

House Panel Passes Accredited Investor Bills

By Melanie Waddell

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The House Financial Services Committee passed a series of accredited investor-related bills Wednesday.

The Accredited Investor Definition Review Act, H.R. 1579, would broaden the accredited investor definition to include those holding certain designations, certifications and credentials. That bill was introduced by Rep. Bill Huizenga, R-Mich.

The Fair Investment Opportunities for Professional Experts Act, H.R. 835, introduced by Rep. French Hill, R-Ark., would freeze the financial thresholds and tie them to inflation. It would also expand the accredited investor definition to include advisors and brokers, as well as those who have relevant education or job experience to qualify as “having professional knowledge of a subject related to a particular investment, and whose education or job experience” as verified by the Financial Industry Regulatory Authority or an equivalent self-regulatory organization.

Micah Hauptman, director of investor protection for the Consumer Federation of America, said in an email to ThinkAdvisor that “CFA strongly opposes” French’s bill.

“It would legislatively enshrine an approach to accredited investor based on financial thresholds we know don’t work at identifying a population of investors that can fend for themselves without the protections afforded by the public markets,” Hauptman said. “It was bizarre watching so many members of Congress lambast the financial thresholds, then legislatively enshrine them.”

A fourth bill, the Equal Opportunity for All Investors Act, would require the Securities and Exchange Commission to devise an accredited investor certification exam.

Michael Canning, principal and founder of The LXR Group in Washington, told ThinkAdvisor Thursday in an email that the bills “reflect another incremental expansion in the size of the of the pool of accredited investors, and away from reliance on income and net worth as the exclusive factors considered for purposes of accredited investor status.”

In general, the bills that passed with bipartisan support “reflected the more thoughtful and modest of the proposals, while the more radical ideas were mainly advanced on party line [vote] and seem unlikely to make it into any regulations anytime soon,” Canning opined.

“What’s most problematic is that the bills only consist of issuer friendly expansions of the definition; there is nothing in them to modernize or improve protections for investors,” Canning said.

Melanie Waddell

@Think_MelanieW

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