ACA Responds to SEC Proposed Rule Amending the “Accredited Investor” Definition

By: Pat Gouhin, Chief Executive Officer

In late 2019, the Securities and Exchange Commission proposed amendments to the existing “Accredited Investor” definition to increase access to investment opportunities.  The additions include new categories to the definition that would allow for someone to qualify as an accredited investor based on professional certifications and designations, or other credentials issued by an accredited education institution.  The SEC is not proposing changing the thresholds for an accredited investor and those are expected to stay as is.  A 60-day public comment period was provided in which the Angel Capital Association submitted a response letter for further clarification and expansion of sections of the proposed updates. 

ACA supports the SEC’s incremental expansion of the accredited investor pool and other proposals to expand startup access to angel capital, with the agreement that the reforms are balanced with regard for investor protection.  ACA also applauds the new ways to become an accredited investor that are not related to income, net worth or financial standards.

The response letter requests more clarification on the investor standard based on educational certification and improvements based on the proposed language.

The reexamination of the accredited investor definition offers an opportunity to rectify a current problem in angel investing and startup capital formation – the elimination of the spouse or partner of an accredited investor from participating in follow on rounds in the case of death or divorce.  ACA has requested that a spouse or spousal equivalent who doesn’t meet the accredited investor definition will qualify to participate in later investment rounds.

ACA will keep our members informed as updates to the accredited investor definition are available.  See the full response letter here.