As a Member of Congress deeply involved in the legislative drafting of Section 201, Rep. Waters emphasized that self-certification was never contemplated to be an adequate form of verification. She urged the SEC to consider defining specific, additional verification requirements, particularly relating to the protection available to natural persons claiming accredited investor status. The senior member also asked the SEC to consider requiring some form of third-party verification, such as letters from attorneys, accountants, or broker-dealers.
In addition, and related to the issue of protection of natural persons, Redp. Waters believes that the Commission should consider amending the definition of accredited investor in light of the expansion to Rule 506 provided in the JOBS Act. Despite Section 413 of the Dodd-Frank Act, which precludes changes in the net worth threshold in the accredited investor definition before 2014, the Representative believes that the SEC has the authority to adjust this definition.
Rep. Waters also urged the SEC to set standards for the reporting of performance and fees by hedge funds and other private funds using the offering exemption proposed under Rule 506(c). Given that the SEC has acknowledged that hedge funds in particular pose heightened risks to investors, reasoned Rep. Waters, it would be appropriate to establish clear reporting standards before allowing such funds to advertise or solicit the public.