Holland Reporter

On April 27, 2023 the House Committee on Financial Services successfully advanced Congressman Huizenga’s legislation, the Accredited Investor Definition Review Act, with an overwhelmingly bipartisan vote of 41-2. The Accredited Investor Definition Review Act would modernize Securities Act of 1933 and the Dodd-Frank Wall Street Reform and Consumer Protection Act with respect to the definition of accredited investor. 

Currently, one of the qualifications the Securities and Exchange Commission (SEC) uses to determine an accredited investor is an asset threshold of one million dollars. This antiquated view limits funding for small business startups and shuts everyday Americans out of this portion of our capital markets.

Huizenga’s legislation would require the SEC to update the list of certifications, including the “millionaire requirement” that an investor must satisfy to qualify as an accredited investor to ensure that all Americans have an opportunity to participate in the growth and success of our economy.

During the committee markup of the Accredited Investor Definition Review Act, Huizenga blasted the current wealth-based standard used by the SEC saying it limits potential investors as well as stunts small business job growth. 

“The Accredited Investor Definition Review Act would expand investment opportunities for sophisticated investors who might not have the advantage of being born in the ‘right’ zip code or have generational wealth, while at the same time providing small, private startup companies with additional sources of funding,” said Congressman Huizenga. “The current definition the SEC uses to identify an accredited investors is outdated. Today that definition is solely based on wealth. The ability to participate in a private offering should not be limited to individuals that pass some type of federal government assets test. Instead, the ability to participate should be expanded to include all individuals that demonstrate they have a sufficient understanding of the offering and the risks involved.”

Video of Congressman Huizenga discussing the Accredited Investor Definition Review Act is available below.

Over the last 4-months, our committee has heard from everyday Americans, not just the elite or wealthy, but those who have succeeded despite rules that put them at a disadvantage.

We heard from women like Omi Bell, who founded Black Girl Ventures, an organization focused on providing woman of color with access to community networks, capital, and capacity building to develop and grow their business.

Omi testified before the Subcommittee on Capital Markets that her mother invested 10,000 dollars of her own retirement to support her first business venture. Yet her mom was not considered an accredited investor, but someone who wanted to support her daughter’s ambitions.

We also heard testimony from David Olivencia, CEO and Co-Founder of Angeles Investors, who, while earning his MBA from Notre Dame, learned about startups and how early-stage investments could lead to outsized returns. Unfortunately for David, he did not qualify as an accredited investor, because he had not, in his words, inherited wealth from his family.

The stories of Omi and David are all too common in the investment world. While innovators often turn to their local communities for support, they often lack the ability to reach those investors who can make a huge impact.

Under current law, accredited investors are allowed to purchase securities that haven’t been registered with the SEC.  These types of offerings carry more risk than public offerings.  In theory, individuals with enough financial sophistication or net worth can bear the potential losses that may be associated with these types of securities. 

My bill, the Accredited Investor Definition Review Act would require the SEC to incorporate additional “certifications, designations, or credentials that further the purpose of the accredited investor definition” within 18 months, and thereafter, assess the addition of certifications, designations or credentials every 5 years.

The bill would expand investment opportunities for sophisticated investors who might not have the advantage of being born in the “right” zip code or have generational wealth and to also provide small, private startup companies with additional sources of funding.

The current definition the SEC uses to identify an accredited investors is outdated. Today that definition is solely based on wealth. The ability to participate in a private offering should not be limited to individuals that pass some type of federal government assets test. 

Instead, the ability to participate should be expanded to include all individuals that demonstrate they have a sufficient understanding the offering and the risks involved. 

Original source can be found here.