Reform the Accredited Investor Rule to Improve Startups' Access to Capital

Expanding the pool of "accredited investors", by allowing individuals to qualify by passing a "sophistication test", could improve startups' access to capital without weakening investor protections.

The net worth and income tests included in the Securities Act of 1933 were intended to protect unsophisticated investors from complex and potentially risky investments. Unfortunately, the actual effect of these tests is to limits access to investment vehicles, with returns characteristics that are often superior to the public markets, to those who are already wealthy. In addition, it has the adverse effect of limiting capital formation for emerging businesses--an effect that was only partially mitigated by the JOBS Act. We share the SEC's concern with protecting investors from unsuitable investment products, however, we believe that this objective can still be satisfied while providing a mechanism for sophisticated investors, who would not qualify under the current income and net worth tests, to qualify as "accredited."