Schweikert, Tillis, Hill Applaud SEC Ruling on Modernization of the Accredited Investor Definition

August 27, 2020
Press Release

WASHINGTON, DC - Today, Rep. David Schweikert (AZ-06), Sen. Thom Tillis (R-NC), and Rep. French Hill (AR-02) issued the following statements after the Securities and Exchange Commission (SEC) adopted final rules to modernize the definition of an “accredited investor."

"I welcome today’s announcement from the SEC to expand the definition of an accredited investor following our bipartisan work in Congress on this issue over the past four years. The SEC’s new rule is a good first step in providing more access to capital for hard-working Americans looking to raise capital or start a business,” said Rep. Schweikert. “While I am pleased to see this change, I will continue to encourage my colleagues in Congress to adopt our legislation to expand the definition even further, allowing more Americans the equal opportunity to participate in early growth opportunities."

"The majority of new jobs are generated by companies less than five years old, and we must continue to reduce the bureaucratic red-tape and allow these companies to receive financing by people with the appropriate expertise,” said Sen. Tillis. “I want to thank Chairman Clayton for finalizing rules that will expand the universe of people who can invest start-up companies to people who have subject-matter expertise and will allow small and emerging companies to continue to grow and produce jobs." 

"I congratulate Chairman Clayton for updating this antiquated rule and for expanding the definition of an accredited investor. However, the SEC did not go far enough," said Rep. Hill. "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. I will continue to work with my fellow policymakers to expand the definition of the accredited investor to allow those with professional experience to be able to invest in their industries." 

Background:

The Fair Investment Opportunities for Professional Experts Act was introduced by Reps. Schweikert and Hill in October 2019 (H.R. 4762). This legislation expands the definition of an accredited investor, allowing Americans who have relevant education, professional expertise, or other similar credentials to invest in private offerings. 

Because of significant costs and barriers to raising capital in the U.S. public markets, most small companies raise start-up or expansion funds in the private market where they can sell securities to “accredited investors” only. The current definition focuses on the financial status of the investor, and as a result, only wealthy individuals can participate in private offerings, barring the majority of Americans from what may be attractive investment opportunities.

In December, the SEC proposed a rule to allow those with special certifications to be considered an accredited investor. In March 2020, Rep. Schweikert joined a comment letter with cosponsors of the legislation in both the House and Senate asking SEC Chairman Clayton to expand the final rule to be reflective of the Fair Investment Opportunities for Professional Experts Act as the proposed rule did not include professional experience in its new definition. 

In the 115th Congress, the House Financial Services Committee passed Rep. Schweikert’s previous version of this legislation, H.R. 1585, by an overwhelming bipartisan vote of 58-2, and by a voice vote in the full House; it has not yet received consideration in the Senate this Congress. 

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