Senator Murkowski said that it is in the interests of state and local governments for the SEC to add governmental entities to the definitions of accredited investor and qualified institutional buyer when it promulgates rules pursuant to the legislation. The reasons for including governmental entities in these definitions are that governments are large and sophisticated investors with professional treasury management staffs that manage large amounts of the government’s own money and seek to invest in securities in order to prudently diversify their investment portfolios and obtain a favorable return. Many of the most attractive investments are offered only in private placements to institutional investors conducted under Regulation D or Rule 144A. Without access to these investments, the government earns a lower return and has less diversification in its investments than would be optimal. The Senators asked Chairman Dodd if he agreed that when the SEC promulgates its rules under the legislation, it should address, while taking care to ensure appropriate minimum asset protections are in place, the inclusion of state and local governments in the definitions of accredited investor and qualified institutional buyer.
In response, Senator Dodd said that the SEC certainly has existing authority to add state and local governments to the definitions of accredited investor and qualified institutional buyer under its Securities Act rules, adding that it would be appropriate for the SEC to take the opportunity presented by the rulemakings under Section 412 of the legislation to consider whether to include state and local government bodies within those definitions.