Accredited Investor Definition Review Act

Mr. Speaker, this is an issue that is near and dear to me, having spent virtually my entire legislative career on the Capital Markets Subcommittee, including a time as the chair and ranking member, and this is something that many of us have been working on for a long time.

Thanks also to Chairman McHenry for setting out an ambitious agenda to strengthen and expand access to our capital markets.

The legislation being considered here today, both the previous bill, H.R. 835, and my bill, H.R. 1579, make good on this promise while increasing opportunity for small businesses, as well as investors in Michigan's Fourth Congressional District and across America.

Under Gary Gensler, the Securities and Exchange Commission continues to blow past their longstanding three-part mission to protect investors; maintain fair, orderly, and efficient markets; and to facilitate capital formation with a number of other things that are well beyond that. We are here today to refocus the SEC on its core mission to help more Americans participate in our capital markets.

During our bipartisan effort, we have heard uplifting stories from Americans who inspire a new generation of entrepreneurs.

Look, we all know some very hardworking, middle-income folks who know how to manage their money and manage their money well. Frankly, we probably all also know stories of wealthy people who, frankly, don't have a clue financially, and I would never turn over our money to them to manage or to invest.

So let's talk about a couple of those people in the first category. I start, first, with a woman named Omi Bell. Omi Bell founded Black Girl Ventures, an organization focused on providing women of color with access to community networks, capital, and capacity building to develop and grow their businesses. Omi does that right here in Washington, D.C.

Omi testified before our Subcommittee on Capital Markets that her mother invested $10,000 of her own retirement to support Omi's first business venture. Yet her mom was not considered an accredited investor and, despite her desire to support her daughter's ambitions, she could have been disallowed from investing in that.

We also heard testimony from David Olivencia. He is the CEO and cofounder of Angeles Investors, who, while earning his MBA from Notre Dame, learned about startups and how early-stage investments could lead to outsized returns.

Unfortunately for David, as he told his story, he said he did not qualify as an accredited investor because his immigrant family did not have wealth that he could inherit.

That is a horrible way, Mr. Speaker, to decide whether someone should or can invest in a dream and in something that they know about. I can tell you this: Both Omi and David are all too common in the investment world. While innovators often turn to their local communities for support, they often lack the ability to reach those investors, those truly accredited investors, who can make a huge impact.

Mr. Speaker, under current law, accredited investors are allowed to purchase securities that have not been registered with the SEC. These types of offerings carry more risk than public offerings. In theory, individuals with enough financial sophistication or net worth--again, those are two different things--can bear the potential losses that may be associated with these types of securities.

My bill, the Accredited Investor Definition Review Act, would require the SEC to incorporate ``certifications, designations, or credentials that further the purpose of accredited investor definition.''

The bill would expand investment opportunities for knowledgeable investors and provide small business job creators with additional sources of funding.

The current definition the SEC uses to identify accredited investors is outdated and based solely and wrongly on wealth and net income. You shouldn't have to be a millionaire to be an accredited investor.

The ability to participate in a private offering should not be limited to individuals that pass some sort of Federal Government assets test. Instead, participation should be expanded to include all individuals that can demonstrate they have sufficient understanding of the offering.

Mr. Speaker, my legislation is about leveling the playing field. Do you see the theme, by the way? The theme from the Republicans and, I believe, many on the other side is this: We want to make sure that we allow all Americans to participate in our economic system.

So whether it is in Kalamazoo or Portage, whether it is in Benton Harbor or St. Joe, or Battle Creek or in Springfield, investors should be able to support small business startups in their local community across southwest Michigan and around the Nation.

I look forward to continued bipartisan support for this issue. I thank the chairwoman of the Subcommittee on Capital Markets and the ranking member, Mr. Sherman, as well as Representative Lawler, for their work. I look forward to getting this across the finish line and helping the American people and American small businesses.

Mr. Speaker, I rise in support of H.R. 1579, and I yield myself such time as I may consume.

The Accredited Investor Definition Review Act is, of course, sponsored by the gentleman from Michigan. The accredited investor definition is out of date and needs changing. A lot of these comments relate to the comments I made on the previous bill.

The current definition is based on wealth, which is not really a proxy for an individual's knowledge or experience. It may, in part, be a proxy for their ability to absorb losses; but the wealth standard was established in 1982 and hasn't been revised, so it was either wrong then or it is wrong now.

Further, the amount of wealth required to meet the accredited investor threshold, of course, has been eroded and, as I said speaking of the prior bill, has gone from 2 percent of our Nation to 20 percent of our Nation.

So we need to define who Wall Street can sell risky and illiquid products to, and not those who have created a nest egg, which is so much smaller than the nest egg in terms of purchasing value that we required when these standards were developed.

The SEC may establish a definition to protect working families from these

high-risk products, while allowing those who are knowledgeable to make the investment.

Mr. Huizenga's Accredited Investor Definition Review Act reaffirms the authority of the SEC to review the credentials that will qualify an accredited investor and update the list of credentials. This ensures that the definition is not stagnant and changes with the times.

As a result, more investors will have access to private markets while ensuring that they have the adequate knowledge base to understand the risks involved.

I would add that perhaps wealth shouldn't be an entryway to investments. It should be exclusively based on one's knowledge. If we did that, we would want to look not only at the knowledge of the investor, but the knowledge of their advisers, but only if those advisers were truly independent, because an investor being advised by someone who earns a commission or someone who gets referrals from the promoter is not a truly independent adviser.

So this bill moves us forward to doing something that should have been done many years ago. We are stuck with rules drafted in 1982. This bill requires the SEC to begin the process of revising those rules. I urge my colleagues to vote ``yes'' on this important bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further speakers and I am prepared to close. I yield myself the balance of my time.

I want to respond to the comments from the gentleman from Michigan to some degree. I think I speak for the majority of the Democratic Caucus that we have a balanced view. We want investor protection, and we want investments to be made in private offerings by those who understand the risk and understand the company they are investing in.

The idea that we would open the door to every investment and allow an unlimited number of people with no particular expertise or meeting other standards would mean that we wouldn't have any initial public offerings. Every company would become a public company. We wouldn't have an SEC. That is not where we want to go.

This bill is consistent with that balanced view. The gentleman from Michigan also says he thinks the SEC is being distracted and is not carrying out its core mission.

Just today, they went after a crypto exchange, and I can't think of anything more essential to their core mission.

Another controversy is whether investors in public companies will be given information about the environmental and carbon effects of the company. Many investors want that information, and giving investors information that many of them want is a core definition of the SEC.

Finally, the gentleman from Michigan puts forward a very inaccurate view of our current law. It is not true that you can't invest in your brother-in-law's pizzeria unless you have a million dollars in net worth. If that were true, I couldn't get a pizza on Ventura Boulevard.

The fact is that we do allow up to 35 unaccredited investors in private offerings, and the vast majority of what we think of as the really small businesses, the ones up and down Ventura Boulevard--the pizzeria, the restaurant, whatever--fit into that category.

We do have a securities law system that works pretty well. We can improve it. This bill does that. The SEC should amend its accredited investor definition to better protect investors and retirees from being solicited for high-risk, unsustainable products just because they meet an asset threshold that hasn't been revised in 40 years.

I urge the SEC to review that asset threshold as part of the periodic review required by this bill.

Mr. Speaker, I urge my colleagues to support this bill and to support a balanced investor protection regime, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1579) to amend the Securities Act of 1933 and the Dodd-Frank Wall Street Reform and Consumer Protection Act with respect to the definition of accredited investor, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 1579, the Accredited Investor Definition Review Act.

I thank my colleagues, Congressmen Huizenga and Lawler, for working on this important piece of legislation that balances increasing investor opportunities with investor protection.

Currently, to qualify as an accredited investor, an individual must have an annual income of at least $200,000 or a net worth of over $1 million. These thresholds exclude many sophisticated but not wealthy investors from participating in high-growth private companies.

H.R. 1579 requires the SEC to review and update the list of certifications, designations, and credentials that an investor must satisfy to qualify as an accredited investor every 5 years, ensuring that the definition remains relevant and accessible.

By supporting H.R. 1579, we can create a more democratized investment landscape, where more Americans have the opportunity to invest in high- growth private companies, not just the wealthy elite.

This bill provides a pathway for sophisticated investors of all backgrounds to accumulate wealth and participate in the success of private companies.

Mr. Speaker, in short, by expanding the definition of accredited investors and promoting greater access to private investments, H.R. 1579 will help to level the playing field and ensure that all Americans have an opportunity to participate in the growth and success of our economy.

For this reason, I urge my colleagues to support H.R. 1579.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Michigan (Mr. Huizenga), the author of the bill, who is also chairman of the Oversight and Investigation Subcommittee of the Committee on Financial Services.

Mr. Speaker, I strongly urge my colleagues to support H.R. 1579, and I yield back the balance of my time.

Mr. Speaker, I rise today in support of H.R. 1579, the Accredited Investor Definition Review Act of 2023.

This bill revises who may be considered an accredited investor for purposes of participating in private offerings of securities.

Certain unregistered securities may only be offered to accredited investors.

Specifically, the bill allows the Securities and Exchange Commission (SEC) discretion in determining what certifications, designations, or credentials investors must possess for purposes of investor protection, provided that the credentials are at least as broad as the existing regulations.

Additionally, the SEC must review these credentials every five years.

This bill amends the definition of investor in the Securities Act of 1933 by adding the following language:

``(C) an individual holding such certifications, designations, or credentials as the Commission determines necessary or appropriate in the public interest or for the protection of investors, where such list of certifications, designations, or credentials shall be no less broad than those certifications, designations, or credentials described in the amendments made to section 230.501 of title 17, Code of Federal Regulations, by the final rule of the Commission titled `Accredited Investor Definition' (85 Fed. Reg. 64234; published October 9, 2020).''

This amendment will give small business startups and everyday citizens in Houston and around the U.S. the opportunity to participate in the growth and success of our economy.