Wednesday, February 03, 2016

House Passes Bill to Expand Accredited Investor Definition

By Mark S. Nelson, J.D.

The House has once again begun a new year by moving forward on a few securities bills, including one that would broaden the definition of accredited investor. Two other bills that add to the SEC’s responsibilities also will go to the Senate. A press release issued by House Financial Services Committee Chairman Jeb Hensarling (R-Tex) said the securities bills will help to grow the U.S. economy.

The Fair Investment Opportunities for Professional Experts Act (H.R. 2187), sponsored by Rep. David Schweikert (R-Az), would revise the Securities Act’s definition of “accredited investor” to add registered brokers and investment advisers, and to include persons who have professional knowledge of a particular investment based on their demonstrable education or experience. Other revisions track language in Rule 501 of Regulation D but, in the case of net worth, would require an adjustment for inflation every five years. The bill passed the House on a recorded vote of 347-8, after having been reported out of the FSC by a vote of 54-2.

Under a bill offered by Rep. John Carney (D-Del), the SEC Small Business Advocate Act of 2016 (H.R. 3784), the SEC would need to establish the Office of the Advocate for Small Business Capital Formation to report to the Commission on the treatment of small businesses by the agency and SROs, to identify regulations in need of change, and to identify problems that hinder access to capital by small businesses, but especially for minority- and women-owned businesses. The bill, which also would create a related advisory committee, sailed through the FSC and passed the House by voice vote.

A final securities bill, the Small Business Capital Formation Enhancement Act (H.R. 4168), as with the accredited investor bill, required a recorded vote that resulted in passage by a margin of 390-1. Representative Bruce Poliquin’s (R-Me) bill would alter the Small Business Investment Incentive Act of 1980 to require the Commission to review and promptly issue a public statement on the findings of the government-business forum on capital formation. The SEC also would have to disclose any action it plans to take based on those findings.

The Carney bill, H.R. 3784, also would make a technical amendment to the Small Business Investment Incentive Act to allow the Commission to act through the Office of the Advocate for Small Business Capital Formation. The new SEC office would consult with the proposed advisory committee. These revisions would work in tandem with Rep. Poliquin’s bill.