This week, the SEC met to discuss potential changes to the definition of Accredited Investor. For most private placements, i.e., unregistered stock offerings (think Uber, Snapchat, WeWork) are limited to "Accredited Investors"
There are several ways in which a person / entity qualify as an Accredited Investor, with the most frequently used being:
- Individual income of $200,000 or more (or joint income with a spouse of $300,000 or more) in each of the last two years and a reasonable means of maintaining that income level in the future.
- Net worth of more than $1 million, excluding the value of a primary residence.
The current rules disenfranchise millions of potential investors who are not afforded the opportunity to invest in early stage companies. Barriers to participation foster income inequality by reserving the most lucrative opportunities to wealthy individuals.
Want to invest in Uber, Airbnb, Palantir? Sure, but only if you're wealthy.
I sure hope they incorporate some test-in or credential-based qualification.
Fingers crossed that our government gets this right.
Stay tuned.