What's this? Redefining accredited investor
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The current definition of an "accredited investor" can be found in rule 501 of Regulation D, which is based on the Securities Act of 1933, but one of Friday's panelists thinks it's time to open up that rule.
- Why it matters: Because of this rule, since the initial coin offering era of 2017, regular people have been shut out of buying new tokens or coins before they hit the public market.
Zoom in: In a paper published in February, two BakerHostetler attorneys, Teresa Goody Guillén and Isabelle Corbett Sterling, proposed revisiting the notion of an accredited investor.
- "An enduring American principle is that individuals should retain the freedom to make choices about how to manage their own money. The presumption that people must be shielded from potential mistakes—based solely on their income or financial standing—undercuts this principle," they write.
State of play: Currently, an accredited investor is something (a person or a firm, etc.) with a net worth of $1 million or $200,000 in annual income ($300,000 for married couples).
- Fun fact: The word "accredited" makes it sound like the SEC has a list of approved investors somewhere.
- There is no list.
What we're watching: The paper's authors propose two additional paths to qualify.
- First, a sort of driver's license test of financial literacy, to show that the person can assess what kind of risk they are taking.
- Second, allowing people to make investments through a qualified financial adviser.
Flashback: Guillén was once rumored to be a strong contender to be the next SEC chair.
- Former commission member Paul Atkins ultimately got the nod.
