U.S. Sen. Thom Tillis (R-NC) and U.S. Rep. French Hill (R-AR) applauded recent action by the Securities and Exchange Commission (SEC) to modernize the definition of an accredited investor and open up the private capital markets to more American investors.
“I want to thank Chairman [Jay] Clayton for finalizing rules that will expand the universe of people who can invest in start-up companies to people who have subject-matter expertise and will allow small and emerging companies to continue to grow and produce jobs,” said Sen. Tillis.
Because of significant costs and barriers to raising capital in the U.S. public markets, many small companies raise start-up or expansion funds in the private market where they are permitted to sell securities to only accredited investors, according to information provided by Rep. Hill’s office, which noted that the current definition of accredited investor results in just wealthy individuals being able to participate in private offerings.
In December 2019, the SEC proposed a rule to allow those with special certifications to be considered an accredited investor and on Aug. 26 adopted final rules that update the definition of accredited investor by adding new categories of qualifying individuals and entities that the SEC said should not be excluded from the large, multifaceted private capital markets.
“Allowing individuals to invest in different opportunities should not be limited to those who can pass an arbitrary wealth test set by the government. Instead, accredited investors should include individuals who demonstrate a strong understanding of their industry,” Rep. Hill said.
Rep. Hill in October 2019 introduced the Fair Investment Opportunities for Professional Experts Act, H.R. 4762, to expand the definition of an accredited investor. That bill followed the introduction by Sen. Tillis in April 2018 of the same-named S. 2756.
“The majority of new jobs are generated by companies less than five years old,” Sen. Tillis said. “We must continue to reduce the bureaucratic red tape and allow these companies to receive financing by people with the appropriate expertise.”