The SEC will vote next week on broadening the definition of "accredited investor" to allow more investors to partake in private, unregistered investments, including hedge funds.

The Securities and Exchange Commission plans to consider the amendments to the Securities Act of 1933 on Wednesday, according to the SEC’s notice.

SEC Chairman Jay Clayton told members of the Senate Banking, Housing and Urban Affairs Committee earlier this week that the agency wants to expand the definition of accredited investor to create a larger pool of sophisticated investors, including registered investment advisor and family office clients, whom he said should be able to partake in private securities offerings.

Right now, accredited investors are limited by a “binary definition based on wealth. There are a number of people who have the sophisticated ability to assess investments who may not meet the wealth threshold,” Clayton told lawmakers.

Some legislators at the hearing voiced support for the proposal, with Senate Banking Committee Chairman Mike Crapo (R-Iowa) saying the change should be made "to account for expertise not just monetary threshold."

The definition of accredited investor is important because such investors have privileged access to venture capital, hedge funds, angel investments and deals involving complex and higher-risk investments and instruments.

As currently defined by the SEC, an accredited investor is a person or a business entity that satisfies one requirement regarding income, net worth, asset size, governance status or professional experience. Accredited investors include natural high-net-worth individuals with $5 million in assets or more, banks, insurance companies, brokers and trusts.

The SEC asked for public comments on relaxing the accredited investor rule earlier in the year.

The Investment Advisers Association is supporting the expansion of accredited investors, while consumer groups such as the Consumer Federation of America worry that it will allow advisors and brokers to target less sophisticated investors with higher-risk investments.