What to Make of the SEC’s New Accredited Investor Rules

The U.S. Securities and Exchange Commission (SEC) has formally adopted new accredited investor rules, expanding the group of Americans who can invest in private securities.

The new definition, which lets individuals holding certain licenses meet the definition of “accredited investor,” was first released for public comment in December 2019. Accredited investors in the U.S. – which currently include individuals who have a net worth of more than $1 million, annual income greater than $200,000 or entities that meet certain legal requirements – have access to private financial markets the broader public does not.

Still, the move isn’t broadly expanding the list of individuals who can take part in the private markets. Zachary Kelman, a partner at Kelman Law, told CoinDesk shortly after the proposal was unveiled in December that “Wall Street insiders” and similar individuals may benefit most.

Drew Hinkes, general counsel at Athena Blockchain, similarly told CoinDesk at the time that more clarity was needed on what type of credentials might qualify individuals to become accredited investors.

On Wednesday, he said on Twitter that the new definition was “not meaningful,” at least for now.

“The proposed modernization would appear to include persons who are licensed to sell securities but who otherwise did not previously qualify to buy private placements as accredited,” he told CoinDesk via Telegram.

As was the case in December, the potential to add certain academic credentials or similar certifications might grow the space more, but this has yet to be properly defined.

Indeed, as Hinkes pointed out, the SEC itself acknowledges that the expanded definition might not grow the pool of accredited investors that much. The document released Wednesday states:

“We do not expect that number of newly eligible individual accredited investors to be significant compared to the number of individual investors that currently are eligible to participate in private offerings, and (2) we expect the amount of capital invested by such newly eligible individual investors to have minimal effects on the private offering market generally.” 

The document indicates that only individuals with Series 7, 65 or 82 certifications would qualify for now.

Hinkes said the move is still promising, however.

“The modernization reflects the SEC’s willingness to continue to consider further expansion of the definition to include other certifications or credentials and includes an invitation for the public to offer suggestions,” Hinkes told CoinDesk.

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