Act Now: Protect Angel Startup Funding
ACA Press Release: Protect Angel Funding
Why the Accredited Investor Definition Matters
The SEC was charged with setting detailed rules on accredited investor standards following the "Dodd-Frank Act". The complicated law included a section that changed the net worth requirement for accredited investors - the standard for net worth remained at $1 million, but eliminated a person's primary residence from the calculation of net worth.
The legislation also requires the SEC to study the definitions every four years, which next happens after July, 2014. Congress asked the SEC to conduct the study "for the protection of investors, in the public interest and in light of the economy." There is pressure from some organizations to raise the thresholds for income and net worth again for inflation (increasing net worth from $1 million to about $2.5 million, and increasing annual income from $200,000 to about $450,000 for individuals). Such an increase would reduce the number of accredited investors by about 60 percent, per information from the SEC and General Accounting Office.
ACA's Advocacy Work: ACA has been active in 2013 and 2014 in educating the SEC on the importance of not raising the financial thresholds for accredited investor definition. In addition to its work directly on Dodd-Frank legislation in 2010, one of the rules ACA weighed in to the SEC on was how "under water" mortgages on primary residences would be calculated. Additional insights and implications are detailed below:
Consistent Regulation is Key
A critical part of the ACA policy platform is to maintain standards and regulations for accredited investors and the federal rules for investing in startups.
Since 2012, ACA has been active in a few important activities that have or could impact angel investment and accredited investor status:
JOBS Act Rulemaking by the Securities Exchange Commission
Accredited Investor Definitions set by the Securities Exchange Commission
Dodd-Frank Wall Street Reform and Consumer Protection Act