The SEC’s Advisory Committee on Small and Emerging Companies, co-led by Sara Hanks, met the other day to talk about how to update the definition of “accredited investor” following a detailed report issued by the SEC back in December. As we know, only accrediteds are permitted to invest in certain types of securities offerings.
The 1982 thresholds in SEC Regulation D say you’re accredited with $200,000 annual income or a $1 million net worth (now excluding your primary residence). I know my friends will be mad at me, but if you go to www.dollartimes.com, it tells you that $200,000 in 1982 dollars is worth $503,244 today after inflation. Luckily it doesn’t appear anyone at the SEC is proposing increasing the amount that much. And they are also considering letting you be accredited if you have certain types of licensing, such as an accountant or financial planner. They also are considering not increasing the thresholds but limiting the amount you can invest if you make over $200,000 but less than some other level. They’re even considering developing an exam to show you are sophisticated regardless of income.
So I don’t think it’s whether but when these changes will be made, and how severe they will be. I like expanding it to knowledgeable folks even if not meeting income standards. Reg D offerings have been the bulwark of the investment community for decades. Let’s hope the staff and Commissioners (including the two new ones who are coming, having been approved by the Senate Banking Committee today) don’t jigger with it too much.