Lawmakers Want 'Financial Pros' Exemption To Accredited Investor Definition

Nov 1 2013 | 11:58am ET

The Securities and Exchange Commission cannot legally change the definition of "accredited investor" until next summer, so two Republican congressman are pushing the regulator to punch a loophole in the rule.

Currently, a person must have at least $1 million in liquid assets or $200,000 in annual income to qualify to invest in hedge funds, private equity funds and other private investments. But, according to Reps. Patrick McHenry (R-N.C.) and Scott Garrett (R-N.J.), that definition—which the SEC seems more likely to tighten than loosen—excludes "highly-trained financial professionals," including accountants, financial analysts and traders.

"A wealth test, to the exclusion of other methods of evaluation of accredited investors, is tantamount to the government sanctioning a special club—those who have already reached a certain level of wealth and are therefore deemed eligible for membership," the congressman wrote to SEC Chairman Mary Jo White. "While those with substantial wealth or income should be allowed to invest in private offerings, it should not be to the exclusion of other knowledgeable investors."

The SEC plans to release a study on the accredited investor thresholds, which are not linked to inflation, next summer. Currently, according to the Government Accountability Office, there are 8.5 million U.S. households that meet accredited investor standards.

It's not clear how much of an impact McHenry and Garrett's proposal would have on the alternative investments industry, given that most hedge and private-equity funds have minimum investment requirements that close them to people under the current thresholds, anyway. But they might free up such individuals to invest in start-ups and other private offerings now permitted under the JOBS Act.


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR