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

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.