The SEC’s ‘Accredited Investors’ Amendment Could Open Doors For ‘Persons With Knowledge’
- An individual only is presently considered an accredited investor if they have over $1 million in net worth.
- The new proposal would allow investors to qualify for this status with their “professional knowledge, experience, or other certifications.”
The U.S. Securities and Exchange Commission is looking to make some changes to the way that individuals and entities invest in the industry. Though they are known for imposing certain restrictions, the passing of a new proposal would do exactly the opposite. According to a press release issued by the authority on Wednesday, the SEC is aiming to add new qualifications to the current definition of what an accredited investor is.
Right now, an accredited investor is considered an individual that has over $1 million in net worth or an organization that holds over $5 million in assets. Banks and institutions are also required to meet certain restrictions to be considered an accredited investor. In being defined as this type of investor, the entities can get involved with more private investment opportunities than others, which includes riskier options as well.
With the changes to the current definition, the SEC would allow more categories to be added,
“natural persons that may qualify as accredited investors based on their professional knowledge, experience, or certifications.”
The proposal would also make it possible for an investment test to be used to qualify other entities as accredited investors.
Presently, the definition on record offers no more than a “binary approach” for the status qualification, but SEC Chairman Jay Clayton believes that this approach needs to be updated. He commented that Native American governments could be recognized as entities with the changes, allowing them access to the capital markets in the United States.
Even though there doesn’t seem to be any specific connection to cryptocurrency in this announcement, an article with The Block points out that the changes would allow some crypto-based financial products to be accessed. Grayscale, for example, is a $2.2-billion asset manager, but only accredited investors can use Bitcoin Trust, Bitcoin Cash Trust, and related projects. Bitwise and Galaxy Digital have similar restrictions for certain funds.
After the proposal is published, the 60-day public comment period will be opened. The full proposal from the SEC can be viewed at: sec.gov