Fresh from House passage of his bill to expand the definition of an accredited investors on Tuesday, Congressman French Hill, an Arkansas Republican, told top RIA counsel and compliance executives from throughout the country that the expansion is long overdue.
The modernization of accredited investor laws would “help both investors and employees,” who deserve to be able to get stock and stock options in their company,” even before an IPO, though they may currently be blocked from doing so.
Hill was speaking to a roomful of industry general counsel and compliance officers who convened for the Investment Adviser Association’s Adviser Advocacy Day in Washington, D.C., Wednesday
Without expansion of the accredited investor guardrails, only investors who earn $200,000 annually or are worth at least $1 million qualify for certain investments, including private placements.
Hill’s bill, one of three approved by the House, is the Fair Investment Opportunities for Professional Experts Act, which would extend the accredited investor qualification to professionals who obtain certain licenses or professional experience, including RIAs and brokers.
The bill is similar to a Securities and Exchange Commission rule passed in 2020 that expands the definition to include those with certain licenses and job experience.
Another House bill that has been approved, the Accredited Investor Definition Review Act, gives the SEC the authority to determine which licenses, certifications or designations an investor must possess to qualify as an accredited investor. That bill also mandates that the agency review the accredited investor definition every five years.
The current rules “favor the rich and the affluent over people who have knowledge [from] working in their own area of expertise,” Hill has said on the House floor.
The lawmaker also said that as a result, the accredited investor guardrails currently “discriminate” against anyone who is lower income or from a minority community.
Lawmakers “have taken a few different approaches to expanding the accredited investor definition,” said Neil Simon, IAA’s vice president of government relations, who also spoke at the gathering.
The bills will now go to the Democrat-controlled Senate, where their success is not assured.
On Thursday, more than 100 of IAA’s members are slated to meet with lawmakers and their staffers on Capitol Hill, where Simon said they will press for not only a more workable accredited investor rule, but also for the right to make electronic signatures the default and for a slowing of the onslaught of new regulation from the SEC.
“We’re not just concerned about smaller advisors, but how the torrent of regulations coming out of the SEC affects all advisors,” said Simon, who noted that IAA board members met with three commissioners on Tuesday to make that point.