House Passes INVEST Act to Modernize Capital Markets, Expand Investor Access

The U.S. House of Representatives passed the Incentivizing New Ventures and Economic Strength Through Capital Formation Act (H.R. 3383), also known as the INVEST Act, a package of over 20 bills aimed at expanding the accredited investor definition and increasing access to 403(b) plans, as well as creating a task force at the U.S. Securities and Exchange Commission to focus on senior investor fraud.

The legislation, which passed by a 302-123 vote with bipartisan support, now heads to the Senate. Proponents, including sponsors Reps. Ann Wagner (R-Mo.) and Gregory Meeks (D-N.Y.), said the INVEST Act would make key reforms to strengthen capital formation.

Key provisions of the INVEST Act include the following.

Expanding the Accredited Investor Definition

The package bundles two major legislative efforts to broaden who qualifies as an accredited investor, a status required for participating in high-growth private offerings:

• Knowledge and experience: The Fair Investment Opportunities for Professional Experts Act expands the accredited investor definition to include individuals with certain licensed professional certifications or those with qualifying education or experience, such as certified financial planners. It also calls for existing net worth and income thresholds to be adjusted for inflation every five years.
• Certification exam: The Equal Opportunity for All Investors Act creates a new pathway to qualification based on financial knowledge, rather than wealth alone. This provision requires the SEC to direct the Financial Industry Regulatory Authority to establish and administer a “new, rigorous investment exam” that individuals can pass to earn accredited investor status. The exam is designed to test for financial sophistication, covering topics like risks associated with illiquidity, valuation, and unregistered securities.

Modernizing Retirement Plans

The legislation includes the Retirement Fairness for Charities and Educational Institutions Act, which amends federal securities law to provide greater flexibility and potentially lower-cost options for certain workers.

This measure specifically allows 403(b) retirement plans – which primarily serve teachers, hospital workers, clergy, and nonprofit employees – to invest in collective investment trusts, or CITs, and unregistered insurance company separate accounts, aligning them more closely with the treatment of 401(k) plans.

“Retirement savers participating in other employer-sponsored retirement plans, such as 401(k) plans, have access to cost-effective collective investment trusts and unregistered insurance company separate accounts,” said Wayne Chopus, president and chief executive officer of the Insured Retirement Institute, a trade association that advocates for retirement security. “The legislation will provide parity for 403(b) plan participants and also allow plan providers increased flexibility to build more robust investment lineups with lower-cost options that preserve principal and provide protected guaranteed lifetime income solutions.”

Enhancing Investor Protection and Disclosure

The INVEST Act also included several measures focused on investor safety and modernization:

• Senior security: The Senior Security Act creates an interdivisional task force at the SEC to investigate and report on challenges and necessary protections for investors older than 65. The task force is charged with making meaningful recommendations to Congress.
• Digital delivery: The Improving Disclosure for Investors Act (H.R. 2441) requires the SEC to write a rule allowing financial firms to deliver documents to investors in a digital format.
• Rural business support: The package also includes measures that require the SEC’s Office of the Advocate for Small Business Capital Formation to add rural-area small businesses to its list of entities that deserve specific attention and support.

“We urge the House to pass the INVEST Act,” Chopus said. “If enacted into law, it will facilitate the greater use of protected, guaranteed lifetime income solutions in 403(b) retirement plans, boost protections to safeguard senior investors, and foster transparency and accessibility by permitting the electronic delivery of shareholder reports for all registered investment companies to investors.”

The Securities Industry and Financial Markets Association, or SIFMA, and the Investor Choice Advocates Network, i.e., ICAN, also both applauded the House action, urging the Senate to pass the “vital bill” to ensure capital markets evolve with today’s dynamic needs.

Employer-offered retirement plans have been a popular topic throughout the year. Over the summer, the president signed an executive order urging changes to how Americans invest their 401(k) retirement savings. The order directed the U.S. Department of Labor to re-evaluate existing regulations to make it easier for retirement plans to include alternative assets, such as real estate, cryptocurrency, and private equity – historically available to just institutional and high-net-worth, or accredited investors.

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