A new bill introduced in the House of Representatives would let everyday Americans qualify as accredited investors simply by working with a registered investment adviser or broker-dealer, potentially reshaping who gets access to private markets across the wealth management industry.
Rep. Troy Downing, a Montana Republican, introduced the Informed Investor Access Act ahead of the Fourth of July weekend, describing it as a bid to modernize the definition of an accredited investor and expand access to private investment opportunities for Americans who receive professional financial advice.
Under current securities law, accredited investor status hinges almost entirely on income and net worth thresholds – a framework industry groups have long argued locks out financially sophisticated investors who simply haven't accumulated enough wealth.
Downing's bill would create a new pathway for individuals who receive personalized investment advice or recommendations from a registered investment adviser or registered broker-dealer to qualify as accredited investors for the applicable transaction. The measure would also address a practical barrier that has limited broader use of Rule 506(c) offerings, which allow private deals to be publicly marketed but require issuers to verify that each purchaser meets accredited status.
For financial advisors who have watched high-net-worth clients dominate access to private equity, venture capital and other alternative asset classes, the bill's core premise points to a familiar frustration of sophisticated individuals being locked out of lucrative opportunities.
"Building wealth should not be reserved only for those who are already wealthy," Downing said, tapping straight into that angst as he called out the "self-reinforcing barrier" in the current framework for accredited investors. "Too often, Americans need wealth to access the investments that can help build wealth."
The proposed legislation would amend Section 2(a)(15) of the Securities Act of 1933 to add a new accredited investor category for individuals receiving investment advice or recommendations from a registered investment adviser or registered broker-dealer.
Advisors and broker-dealers already operate under investor-protection regimes: Registered investment advisers are held to fiduciary duties under the Investment Advisers Act, while broker-dealers must meet Regulation Best Interest standards under the Securities Exchange Act. Both require weighing a client's financial situation, objectives and risk tolerance before making a recommendation.
Read more: CAZ Investments founder: SEC accredited investor changes provide 'a freedom that is long overdue'
The sponsors behind the bill emphasize that it's meant to expand access, rather than rolling back investor protections. Downing, who previously served as Montana's securities and insurance regulator, said the bill allows hardworking Americans to grow their wealth through new investment opportunities while keeping important guardrails in place.
The proposal has garnered votes of confidence from more than half a dozen organizations including the American Securities Association, Bond Dealers of America, the Financial Technology Association, and the Institute for Portfolio Alternatives.
"ASA applauds Rep. Downing for giving every American – not just the wealthy – the opportunity to participate in the American dream," President and CEO Chris Iacovella said in a written statement. "The Informed Investor Access Act broadens investor access while preserving important investor protections that make our markets the strongest in the world,"
The Institute for Portfolio Alternatives, which represents firms in the alternative-investment space, panned the current "outdated" approach that "excludes capable investors who make investment decisions with the help of regulated financial professionals."
"This is smart, balanced reform that expands access, strengthens investor choice and supports capital formation without lowering the guardrails," the IPA said.
Advocates for advisors including the Financial Services Institute, the Investment Advisers Association, and the National Association of Insurance and Financial Advisors also came out in support.
"Investment advisers’ fiduciary duty provides a critical investor safeguard by requiring that recommendations be made in each client’s best interest," the IAA said.
"Financial advisors play a critical role in helping investors evaluate opportunities and build financial plans that reflect their unique goals and risk tolerance," noted FSI President & CEO Dale Brown. "The Informed Investor Access Act recognizes the value of that relationship by expanding access to investment opportunities for investors who choose to work with a trusted financial advisor."
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