SEC reveals proposal to expand accredited investor definition

In a press release issued today, the U.S. Securities and Exchange Commission (SEC) voted to propose amendments to the existing accredited investor definitions. The proposal would allow more investors to participate in private capital markets based on professional knowledge, experience, and certifications rather than just income or net worth. The proposal would also expand the list of entities that may qualify as accredited investors if they meet an investment test, and recognizes that tribal governments should not be restricted from US private capital markets.

Why it matters:

• One of the most exciting aspects of the 2017 - 2018 ICO boom was that it opened up early-stage investment opportunities to the masses. However, in the midst of the boom, the industry quickly learned the regulatory risks associated with offering tokens to the public over the internet. In an attempt to comply with existing securities laws, the industry migrated over to SAFT issuance model, which only allowed for accredited investors to participate in token offerings, effectively ending dreams of democratizing access to early-stage investing.
• Although the proposal falls short of fulfilling the vision of democratizing access to private capital markets, it is a step in the right direction. By adding additional qualifications for accreditation based on financial sophistication, the SEC has opened the door towards a future where lack of wealth and income no longer locks people out of some of the most exciting and lucrative investment opportunities the world has to offer.