SEC indicates timing, substance of 'accredited investor' reform

The Securities and Exchange Commission will move ahead “relatively soon” in its review of rules governing who can invest in unregistered securities, Chairwoman Mary Jo White told lawmakers Wednesday. In an appearance before the House Financial Services Committee, Ms. White said a staff study of the accredited investor standard would be released sometime in the next three to four months. The findings could provide the foundation for rulemaking. “There is a definitive need to update” the rule, Ms. White said when asked by Rep. Denny Heck, D-Wash., for a progress report on the SEC's review, which was mandated by the Dodd-Frank financial reform law. The standard sets net worth and income levels needed to qualify as a sophisticated investor who can participate in private placement offerings. Critics have said the criteria, which has not been revised since 1982, needs to allow more people to invest in start-up ventures. Others have counseled caution to ensure investor protections remain. “Clearly what we're looking at beyond the test of net worth and income are other kinds of sophistication, experience, qualifications that certainly many, many would argue should entitle you to be an accredited investor,” Ms. White said. “One wants to be sophisticated about and realistic about what those other criteria are that would meet investor protection concerns. We're looking quite broadly.”