Congress Considers Expanding the Accredited Investor Definition
From the desk of Jim Eccleston at Eccleston Law
A recent congressional hearing examined potential reforms to the accredited investor definition, a critical threshold determining who can participate in private market investments. According to the DI Wire, the U.S. House Financial Services Subcommittee on Capital Markets convened to discuss the Accredited Investor Definition Review Act, sponsored by Congressman Bill Huizenga (R-Mich.). Lawmakers debated whether the current wealth and income requirements should be expanded to include additional qualification pathways.
Under Rule 501 of Regulation D of the Securities Act of 1933, individuals qualify as accredited investors if they meet one of two financial thresholds:
- A net worth exceeding $1 million, excluding the primary residence, either individually or jointly with a spouse
- An annual income exceeding $200,000 in each of the two most recent years (or joint income with a spouse exceeding $300,000) with a reasonable expectation of maintaining the same income level
The SEC last amended the definition in August 2020, expanding eligibility to include:
- Individuals holding specific professional certifications
- “Knowledgeable employees” of private funds, but only for investments in that fund
- SEC-registered and state-registered investment advisers
- “Family clients” of a “family office” meeting certain criteria
- Directors, executive officers, and general partners of an issuer or its general partner
The subcommittee is now seeking public feedback on whether the accredited investor definition should move beyond wealth and income thresholds to consider factors such as education, geography, or other qualifications. The deadline for public comment is March 31, 2025, according to the DI Wire.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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