Thursday, September 04, 2014

Crowdfunding Advocate Urges SEC to Make Private Placement Investments More Widely Available

[This story previously appeared in Securities Regulation Daily.]

By Jacquelyn Lumb

CrowdFund Intermediary Regulatory Advocates (CFIRA), a trade organization that supports the crowdfunding industry, has written to the SEC about the accredited investor standard for purchasers of private securities. In CFIRA’s view, the current standard excludes investors who should be considered appropriate buyers of private securities, such as certified public accountants, chartered financial analysts, registered investment advisers, and others who may not meet the net worth threshold but have the knowledge and experience to evaluate the merits and risks of an investment. The over-arching objective of the federal securities laws is that investors are able to make an informed decision, CFIRA noted. CFIRA does not oppose the use of a financial test to determine investor qualification for private offerings, but recommended that the SEC include an additional standard for qualification based on an investor’s ability to make an informed decision.

CFIRA noted the anomaly of preventing a young investment broker who does not meet the net worth threshold from buying securities in Regulation D offerings, but being able to sell them to clients. The same is true for registered investment advisers, CPAs, and attorneys who advise high net worth clients. These professionals should be viewed as able to fend for themselves based on their education, training, accreditation, and licensing, regardless of annual income or net worth, in CFIRA’s view.

CFIRA also believes that investors who choose to take and pass a standardized test on private placements should be eligible to invest. The test could be similar to the Series 82 examination administered by FINRA, CFIRA explained, and offered its assistance in creating such a test.

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