House committee approves easing accredited-investor standard

The House Financial Services Committee Wednesday morning overwhelmingly approved legislation that would ease restrictions on the kind of investors who can purchase unregistered securities. The bill, written by Rep. David Schweikert, R-Ariz., drew strong bipartisan support and was approved in a 54-2 vote. The measure would expand the definition of “accredited investor.” Under current rules, that designation is limited to people who have $1 million in net worth, excluding the value of their house, or make $200,000 annually, $300,000 for couples. Mr. Schweikert's bill would add two new categories. It would allow investment advisers and brokers to participate in private offerings. It also would approve those investors whom the Securities and Exchange Commission “determines have demonstrable education or job experience to qualify as having professional subject-matter knowledge related to a particular investment,” a committee memo states. The bill generated a rare moment of bipartisan comity during the markup. Rep. Maxine Waters, D-Calif., ranking member of the committee, offered an amendment that would index the income and net-worth standards to inflation. It was approved on a voice vote with the endorsement of the panel chairman, Rep. Jeb Hensarling, R-Texas. The bill, along with six others the committee acted on, now heads to the House floor. “We're trying to expand opportunities for Americans to participate in taking a risk but also engaging in the benefits of the upside using their knowledge, not only just a threshold that says you get to invest just because you have wealth,” Mr. Schweikert said during debate on the bill Tuesday night. As the committee advances the legislation, the SEC has indicated it will soon release a review of the accredited-investor standard. Republicans have pushed to expand the accredited-investor parameters, asserting that doing so would help small business start-ups and other emerging investments raise capital. The SEC Investor Advisory Committee also supports updating the standard as long as investor protections remain. The support from both sides of the aisle for Mr. Schweikert's bill indicates lawmakers' eagerness to revisit the accredited-investor criteria. Mr. Hensarling said it is a matter of “basic fairness,” because too many would-be investors are locked out of the market for so-called Regulation D securities. “We've been denying working Americans investment opportunities,” he said.