House Passes Accredited Investor Bill to Create Qualifying FINRA Exam

The U.S. House of Representatives recently passed the Equal Opportunity for All Investors Act (H.R. 3339), a bipartisan bill that seeks to allow individuals to qualify for private investment opportunities if they can pass an exam.

Sponsored by Reps. Sarah McBride, D-Del.; Mike Flood, R-Neb.; Mike Lawler, R-N.Y.; and Cleo Fields, D-La., the bill would direct the Financial Industry Regulatory Authority, through the U.S. the Securities and Exchange Commission, to create and administer a rigorous investment exam to allow individuals to earn accredited investor status even if they fail to meet the current financial means test.

“Our bill will unlock capital for entrepreneurs and small business owners who’ve been left out for far too long,” said McBride in a statement. “Current law allows only millionaires to invest in private markets — shutting out countless Americans, especially women, veterans and people of color, based on wealth, not knowledge.”

Historically, the definition has been based on financial thresholds, including income and net worth requirements, with the idea that individuals meeting these thresholds are financially sophisticated enough to understand and bear the risks associated with unregistered securities offerings. Generally, the guidelines, pursuant to Rule 501 of Regulation D of the Securities Act of 1933, have required an individual to meet at least one of two criteria:

• A net worth exceeding $1 million, excluding the value of their primary residence, either individually or jointly with a spouse; or
• An annual income exceeding $200,000 in each of the two most recent years (or joint income with a spouse exceeding $300,000) and a reasonable expectation of maintaining the same income level in the current year.

In June of this year, the House also passed the Fair Investment Opportunities for Professional Experts Act (H.R. 3394), led by French Hill, R-Ark., chairman of the House Committee on Financial Services.

As previously reported by AltsWire, H.R. 3394 would freeze the financial thresholds, tying them to inflation, and expand accredited investor eligibility to individuals with certain licenses, education or job experience – both broadening access to alternative investments and supporting capital formation.

Those who are currently licensed or registered as a broker or investment adviser in good standing would qualify under the bill. Regarding “demonstrable education or job experience,” the bill would mandate that the SEC create regulations, also verified by FINRA. This could include professionals with relevant financial expertise, even if they don’t meet the wealth or income criteria.

Both bills now moves to the Senate for a vote, where they are expected to be received favorably given the Republican control of the chamber and the broad bipartisan support.

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