The full House passed late Monday the Fair Investment Opportunities for Professional Experts Act, H.R. 3394, legislation to expand the definition of accredited investor to include individuals with certain licenses, education, or job experience, beyond just those meeting wealth and income thresholds.
The bipartisan bill, sponsored by House Financial Services Committee Chairman French Hill, R-Ariz., passed by a 397-12 vote. It now heads to the full Senate.
It would freeze the financial thresholds and tie them to inflation.
It also would expand the accredited investor definition to include advisors and brokers, as well as those who have relevant education or job experience — such as MBA grads — to qualify as "having professional knowledge of a subject related to a particular investment, and whose education or job experience" is verified by the Financial Industry Regulatory Authority or an equivalent self-regulatory organization. FINRA certifications like the Series 7 would qualify.
Under the bill:
- Individuals with a net worth (excluding their primary residence) over $1 million can qualify as accredited investors. The net worth threshold would be adjusted every five years for inflation.
- Individuals earning an income over $200,000 or a joint income over $300,000 in the last two years, and who expect similar income in the current year, also qualify.
- Those currently licensed or registered as brokers or investment advisors, as well as those who have demonstrable education or relevant job experience in finance or investments, can also qualify.
Further, the bill directs the Securities and Exchange Commission to revise the definition of accredited investor in Regulation D (which exempts certain offerings from SEC registration requirements) to conform to changes in the bill.
Certain investments — like private placements, private equity and debt, and some interval funds and cryptocurrency vehicles — are available only to accredited investors.
Supporters of the accredited investor standard say it helps protect unsophisticated investors from losing money in vehicles that are illiquid, complex or lightly regulated. Opponents say it shuts investors out of potentially lucrative wealth creation opportunities. SEC Commissioner Hester Peirce has said the accredited investor standard should be eliminated.
Micah Hauptman, former director of investor protection for the Consumer Federation of America, told ThinkAdvisor previously 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.
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