House overwhelmingly approves expanding accredited-investor pool

Lawmakers sent a strong signal this week to financial regulators that more investors should qualify to buy unregistered securities

Feb 3, 2016 @ 1:40 pm

By Mark Schoeff Jr.

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(Bloomberg News)

The House of Representatives sent a strong signal this week to federal financial regulators that lawmakers would like to see more investors qualify to buy unregistered securities.

In a 347-8 vote Monday, the House approved legislation that would expand the definition of an accredited investor. Under current rules, a person must have a net worth of $1 million, not including the value of a home, or make $200,000 or more annually.

The legislation would allow anyone who has a securities license or who has professional knowledge and experience related to a specific security to participate in private placements. The latter description would apply, for instance, to a doctor who wants to invest in a medical-device manufacturing startup.

The bill's author, Rep. David Schweikert, R-Ariz., cast the measure as an effort to democratize investing in emerging companies.

“In America today, some of the greatest investment opportunities are available only to those who meet a certain wealth threshold,” Mr. Schweikert said on the House floor. “With passage [of his bill], Congress took a step towards expanding investment opportunity to include hard-working Americans with sophisticated professional experience. In today's hyper-efficient economy, that expansion opportunity is a key part of driving economic growth.”

The lawmaker hopes the decisive House action will encourage his Senate colleagues to take up the bill or a similar measure. Mr. Schweikert is talking to members of the Senate Banking Committee.

“With such a strong vote, you have to feel that there's an opportunity for this,” said Beau Brunson, Mr. Schweikert's legislative director.

Under the Dodd-Frank financial reform law, the SEC must regularly review the accredited-investor standard. In December, the agency released a staff report about options for reforming the criteria.

The SEC Investor Advisory Committee also has expressed support for an update, while calling for appropriate investor protections to be included.

The House vote likely will get the agency's attention.

“When they see the writing on the wall, they start moving a little faster,” Mr. Brunson said.

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