ACA Takes Case of Angels to All SEC Commissioners

By: Marianne Hudson, ACA Executive Director

One of the most important and effective things ACA does for our members is to represent you in Washington, DC. We do this to ensure you have the best possible environment to invest in and support interesting entrepreneurs.  This gives you the best possible chance to enjoy your angel experience and to help wonderful companies exit, leading to good returns for you.

Sometimes our work is aimed at creating new tax benefits or legislation allowing more investors in a fund, but other times our work is truly “do no harm.”  In fact, over the last eight years, our main public policy work has focused on ensuring the definition of accredited investor is not changed in a way that cuts the number of angels in half.  The Securities and Exchange Commission (SEC) is lobbied all the time to raise the thresholds for net worth and income by inflation beginning in the 1980s, more than doubling the $1 million and $200,000 requirements.  Our past research with ACA members showed more than 30 percent of us would no longer be angel investors if that happened.  That’s what I call “existential!”

Cut to March 1, 2018.  ACA Public Policy Chair Christopher Mirabile and I met with four of the five current SEC Commissioners (set up by our government affairs firm Eris Group), and we heard and saw considerable support for angel investors from all of them.  Not only are the large majority committed to not reducing the pool of accredited investors – they are also interested in growing the number of accredited investors.  This feels like a great time for top support for accredited angel investors – it is clear that our work to educate the SEC on who we are is bearing fruit, from commissioners to long-time staff.

During our meetings with new SEC Chair Jay Clayton, new commissioners Hester Peirce and Robert Jackson, and veteran Michael Piwowar, we heard considerable good news:

  • The proposed “advanced Form D rule” - which would have required startups using general solicitation to provide their slide decks on other fundraising materials on a daily basis with the potential of losing their right to raise capital for a year – has been withdrawn from the SEC agenda.  This is a MAJOR victory, as this proposal would likely had led to the premature death of many startups.  ACA was a leader in the four-year fight to put this proposal away.

  • There are no planned regulatory changes to the accredited investor definition in 2018.  The SEC is required to study the definition every four years by Dodd-Frank legislation, and we thought that meant a study would be required this year, but SEC staff explained their plan is to do a study in 2019, four years after their 2015 study (which was a year late).  We need to keep our messaging and efforts strong about the effectiveness of the accredited investor issue, but it is nice to know of the strong support by SEC Commissioners.

  • Chair Clayton and the head of the division that rules on most issues of importance to us, William Hinman, have an agenda for capital formation.  This is an extremely positive development for angels and startups.  Among the topics they are trying to address is opening up the IPO market.  Cheers for that.

Thank you for your support of ACA’s public policy work.  It is an important piece of your membership dues.  We will continue to zealously represent you and look forward to your ideas and questions.