Equal Opportunity for All Investors Act of 2023

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

Mr. Speaker, I rise in support of H.R. 2797, the Equal Opportunity for All Investors Act, sponsored by the gentleman from Nebraska. The accredited investor framework serves to protect the general public from investing in high-risk, illiquid, private securities because they lack the safeguards that are a feature of public securities.

Unlike our public capital markets, companies do not provide anywhere near the same financial and other disclosures to investors for private offerings. Private securities also do not offer the same legal protections for investors.

The SEC and State securities regulators do not have the same ability to police the private markets as they can the public markets. The general rationale behind the comparative lack of regulations governing private securities is that institutional investors like private equity funds, hedge funds, banks, and others can demand the disclosures from the company in exchange for their investment and have significant legal resources to hold the company accountable.

These Wall Street players and other big-money investors don't necessarily need the same level of protections when investing as compared to retail investors like working families do. The accredited investor definition ensures that those who are eligible to invest in private securities do, in fact, have the knowledge to know these heightened risks.

Initially, the SEC defined accredited investors to be those who possess an intimate understanding of the risk and had the knowledge base to decide whether to invest in these particular types of securities.

However, the companies needing to raise capital privately and the underwriters and intermediaries facilitating these capital-raising activities argued for a simpler approach, so the SEC adopted the current definition which is based on financial resources.

Today, an accredited investor must meet three criteria: They must have a net worth either individually or with a spouse exceeding $1 million, excluding the value of their home; make more than $200,000 a year or $300,000 with a spouse; or since 2020, hold certain professional certifications or designations, such as being an investment adviser or broker.

This bill being considered under suspension today aims to return to the original concept of accredited investor, which is that investors in these high-risk investment offerings should be fully aware and knowledgeable of the risks involved.

We all know that just because you have a million dollars, it doesn't mean that you understand the complexities of investing. This is why it is important for the SEC to also update the current thresholds so that Wall Street intermediaries are not able to sell unregulated securities to individuals who have become accredited solely based on

the inflated value of their retirement assets.

For example, unfortunately, there are millions of accredited investors who are now being solicited to invest in products they have little knowledge about and the SEC should act to amend the definition of the accredited investors to protect those investors.

On the other hand, we have heard from some investors who really want to try their luck with some of these risky and illiquid investments, but they do not qualify as an accredited investor because they don't meet the wealth or the income test.

The Equal Opportunity for All Investors Act would solve the latter part of this problem by allowing an individual to qualify as an accredited investor if they pass an exam that ensures they are sufficiently versed in the risk of investing in the private markets.

Generally, private markets are understood to have a higher potential for total loss and can be significantly illiquid than the public markets, so having a deep understanding of these risks is necessary to navigate the space. In addition, there are fewer protections for investors when things go wrong with an investment.

With this change, any investor who wants to invest in private securities can now do so if they can pass this test, which would establish they are keenly aware of the particular risks related to high-risk and illiquid securities, as well as the conflicts of interests presented when financial professionals sell these products to investors.

Mr. Speaker, I thank Mr. Flood and Chair McHenry for working with me to ensure that the test in this bill is established by the SEC and that it contains specific, robust elements that witnesses at previous committee hearings talked about when discussing how they teach and mentor their budding investors. I am also pleased that the tests in this bill would be available free of charge.

I think that this bill will solve the problem of people who are ready to invest, who are not millionaires, they are not billionaires, but they are smart and they know how to determine what the risks are. If they are prepared to take them, then let them do so.

Mr. Speaker, I urge my colleagues to vote ``yes'' on this bill, and I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina (Mr. Nickel), the lead cosponsor of this bill.

Mr. Speaker, I yield myself the balance of my time for closing.

Mr. Speaker, it is important to appropriately tailor the accredited investor definition to protect those who do not have the requisite knowledge to make certain investments while creating a pathway for those who have demonstrable knowledge about the risk associated with investing in private securities.

I believe this bill would ensure that those who possess the knowledge and risk appetite for privately-issued securities are able to invest in those.

Mr. Speaker, I, again, urge my colleagues to support this bill that is offered by Mr. Flood and Mr. Nickel, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2797) to amend the Securities Act of 1933 to require certification examinations for accredited investors, 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 this bill.

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

Mr. Speaker, I rise in support of H.R. 2797, the Equal Opportunity for All Investors Act. I thank my colleagues, Congressman Flood and Congressman Nickel, for their work on this important piece of bipartisan legislation that will safely increase investment opportunities for everyday investors.

The ``accredited investor'' definition is intended to limit private market investments to only those investors who are considered ``sophisticated.''

To qualify as an accredited investor, an individual must have an annual income of at least $200,000 or $300,000 together with a spouse for each of the previous 2 years or a net worth of over $1 million.

However, using wealth as a proxy for determining sophistication excludes a large pool of investors who may have other types of expertise or experience.

According to estimates from the Securities and Exchange Commission, the SEC, in 2016, about 13 percent of U.S. households qualified as accredited investors.

Additionally, only about 1.3 percent and 2.8 percent of accredited investors are Black and Latino, respectively. H.R. 2797 represents a thoughtful approach to expanding the accredited investor definition to include individuals who are certified through an examination established by the SEC and administered by FINRA.

Under this bill, if you can demonstrate competency with these types of investments through an exam, then you qualify as an accredited investor.

Mr. Speaker, by expanding the pathways to qualify as an accredited investor beyond wealth tests, this bill modernizes the outdated definition that has inappropriately sidelined sophisticated-but-not- wealthy individuals from high-growth asset classes historically reserved for the wealthiest individuals. By doing so, this legislation will help more American families realize the American Dream by building wealth through our capital markets.

For these reasons, I urge my colleagues to support H.R. 2797, and I reserve the balance of my time.

Mr. Speaker, I yield to the gentleman from Nebraska (Mr. Flood), the author of this piece of legislation.

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

Mr. Speaker, I strongly urge my colleagues to support H.R. 2797, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I am proud to rise as the co-lead of the Equal Opportunity for All Investors Act with my Republican colleague, Mike Flood, from the great State of Nebraska.

Our bipartisan bill cuts through government red tape to improve choices for investors regardless of their net worth. This will result in greater access to capital for minorities, veterans, and women, and will also spur economic growth in places like North Carolina's Research Triangle Park.

Under the current system, only millionaires can be accredited investors. We want to open up lucrative private securities investments to individuals who have the financial knowledge to understand the risks they are taking on but aren't necessarily millionaires. Our bill does just that by expanding the accredited investor definition which is what allows people to invest in private securities to include individuals that are certified through a robust exam established by the SEC and administered by FINRA.

If you are able to pass a test demonstrating you are financially sophisticated enough to take on the risk of investing in private securities, you should be considered an accredited investor without having to be a millionaire. North Carolina's Research Triangle Park is an essential economic driver from my district. It is home to many small biotech companies working on critical life-changing technologies. Many of these companies rely on accredited investors for capital, so our larger pool of investors will improve their access to funding, spurring growth, and bringing good jobs to working families in North Carolina's 13th Congressional District and around the country.

Additionally, according to Brookings, the average net worth of a typical White family is nearly ten times greater than that of a Black family. By allowing individuals to become accredited investors, regardless of their net worth, this bill will enable more diverse investors to participate in that asset class. Underrepresented entrepreneurs often struggle to access capital, and they greatly benefit from a larger pool of more diverse investors that look like them.

Mr. Speaker, I thank my colleague and co-lead Mike Flood and our Financial Services Committee Ranking Member Maxine Waters for her support and her leadership of this bill, along with Chair Patrick McHenry.

Mr. Speaker, the only real solutions in this Congress are going to be bipartisan solutions. This legislation is the result of Democrats and Republicans working together to improve the lives of the people we represent. I urge my colleagues to join me in supporting the Equal Opportunity for All Investors Act.

Mr. Speaker, I thank the gentlewoman from Missouri for yielding.

Mr. Speaker, the Equal Opportunity for All Investors Act of 2023 will give Americans new opportunities to grow their wealth and savings. I also thank Chairman McHenry, Chairwoman Wagner, Ranking Member Waters, and my Democratic co-lead Wiley Nickel for their support of my bill.

This legislation expands the accredited investor definition to include individuals that are certified, as you have heard today, through an exam written by the SEC and administered by FINRA. It is my firm belief that the accredited investor definition should not be tied exclusively to wealth. Instead, we should unlock opportunities for knowledgeable investors that may not come from means. This bill strikes an effective balance. It brings more investors into the accredited investor pool but also contains guardrails that would filter out individuals that do not fully understand private offerings and the investment risks associated with them.

We have legislation today that would make for a thorough but fair examination for investors that want to become accredited investors.

Mr. Speaker, I urge my colleagues to support my bill.

Mr. Speaker, I rise in support of H.R. 2797 the Equal Opportunity for All Investors Act of 2023, which expands who would be considered an accredited investor for the purposes of participating in private offerings of securities.

Additionally, certain unregistered securities may only be offered to accredited investors.

Furthermore, this bill allows an individual to qualify through an examination established by the Securities and Exchange Commission.

The examination must be designed with an appropriate level of difficulty such that an individual with financial sophistication or training would be unlikely to fail.

It also may include methods to determine competency in certain areas and must be administered by a registered national securities association and offered free of charge to the public.

Currently, accredited investors must satisfy certain requirements indicating their reduced exposure to financial risk, including those related to income, net worth, or knowledge and experience.

I urge all my colleagues to support this legislation.