[Congressional Record Volume 169, Number 97 (Monday, June 5, 2023)]
[House]
[Pages H2717-H2719]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS ACT

  Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 835) to amend the Securities Act of 1933 to codify certain 
qualifications of individuals as accredited investors for purposes of 
the securities laws, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 835

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fair Investment 
     Opportunities for Professional Experts Act''.

     SEC. 2. DEFINITION OF ACCREDITED INVESTOR.

       (a) In General.--Section 2(a)(15) of the Securities Act of 
     1933 (15 U.S.C. 77b(a)(15)) is amended--
       (1) by redesignating subparagraphs (i) and (ii) as 
     subparagraphs (A) and (F), respectively; and
       (2) in subparagraph (A) (as so redesignated), by striking 
     ``; or'' and inserting a semicolon, and inserting after such 
     subparagraph the following:
       ``(B) any natural person whose individual net worth, or 
     joint net worth with that person's spouse or spousal 
     equivalent, exceeds $1,000,000 (which amount, along with the 
     amounts set forth in subparagraph (C), shall be adjusted for 
     inflation by the Commission every 5 years to the nearest 
     $10,000 to reflect the change in the Consumer Price Index for 
     All Urban Consumers published by the Bureau of Labor 
     Statistics) where, for purposes of calculating net worth 
     under this subparagraph--
       ``(i) the person's primary residence shall not be included 
     as an asset;
       ``(ii) indebtedness that is secured by the person's primary 
     residence, up to the estimated fair market value of the 
     primary residence at the time of the sale of securities, 
     shall not be included as a liability (except that if the 
     amount of such indebtedness outstanding at the time of sale 
     of securities exceeds the amount outstanding 60 days before 
     such time, other than as a result of the acquisition of the 
     primary residence, the amount of such excess shall be 
     included as a liability); and
       ``(iii) indebtedness that is secured by the person's 
     primary residence in excess of the estimated fair market 
     value of the primary residence at the time of the sale of 
     securities shall be included as a liability;
       ``(C) any natural person who had an individual income in 
     excess of $200,000 in each of the 2 most recent years or 
     joint income with that person's spouse or spousal equivalent 
     in excess of $300,000 in each of those years and has a 
     reasonable expectation of reaching the same income level in 
     the current year;
       ``(D) any natural person who is currently licensed or 
     registered as a broker or investment adviser by the 
     Commission, the Financial Industry Regulatory Authority, or 
     an equivalent self-regulatory organization (as defined in 
     section 3(a)(26) of the Securities Exchange Act of 1934), or 
     the securities division of a State, the District of Columbia, 
     or a territory of the United States or the equivalent 
     division responsible for licensing or registration of 
     individuals in connection with securities activities;
       ``(E) any natural person the Commission determines, by 
     regulation, to have demonstrable education or job experience 
     to qualify such person as having professional knowledge of a 
     subject related to a particular investment, and whose 
     education or job experience is verified by the Financial 
     Industry Regulatory Authority or an equivalent self-
     regulatory organization (as defined in section 3(a)(26) of 
     the Securities Exchange Act of 1934); or''.
       (b) Rulemaking.--The Commission shall revise the definition 
     of accredited investor under Regulation D (17 CFR 230.501 et 
     seq.) to conform with the amendments made by subsection (a).

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
Missouri (Mrs. Wagner) and the gentleman from California (Mr. Sherman) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from Missouri.


                             General Leave

  Mrs. WAGNER. 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.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from Missouri?
  There was no objection.
  Mrs. WAGNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 835, the Fair Investment 
Opportunities for Professional Experts Act.
  I thank my colleagues from both sides of the aisle, Congressmen Hill, 
Schweikert, Vargas, and others, for working on this important piece of 
bipartisan legislation that will expand the pool of eligible investors 
who can build wealth through private placements. The current 
``accredited investor'' definition restricts access to investments in 
private markets to a select few, largely based on income or net worth. 
This excludes many individuals who have other types of expertise or 
experience that would make them sophisticated investors.
  According to SEC estimates, only 13 percent of U.S. households 
actually qualified as accredited investors in 2016, and only a small 
percentage of accredited investors are Black or Latino. This shows that 
the current definition disproportionately excludes minorities from 
accessing investment opportunities.
  H.R. 835 expands the definition to include individuals with certain 
licenses, educational qualifications, or job experience, opening up 
more investment opportunities for those who are knowledgeable in 
specific fields. I should also note that this bill passed on suspension 
by voice vote in the 115th Congress.
  Mr. Speaker, passing H.R. 835 will help level the playing field for 
minority entrepreneurs who often struggle to secure funding due to lack 
of access to accredited investors. It will also help diversify the pool 
of eligible investors, providing more investment opportunities but also 
unlocking new sources of innovation and economic growth.
  Mr. Speaker, for this reason, I urge my colleagues to support H.R. 
835, and I reserve the balance of my time.
  Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 835, the Fair Investment 
Opportunities for Professional Experts Act sponsored by the gentleman 
from Arkansas (Mr. Hill). This bill passed the committee by voice vote. 
I was there. I didn't hear a single ``no'' vote.
  This bill deals with the overall process of investing in stock being 
sold by the company to investors to raise

[[Page H2718]]

money. We see this happen through public offerings, and most of us one 
way or another or through a pension plan are invested in publicly 
traded stocks.
  The process for a company to go public is an expensive one, and so 
smaller companies also do private offerings.
  We have a process of restricting investments in these private 
offerings to those who can afford and understand the risks and those 
who understand that they can't necessarily sell the security that they 
have purchased readily.
  We do need a framework for accredited investors who are allowed to 
buy in these private offerings. Up until now, our definition of 
accredited investor has focused too much on wealth or income of the 
investor and not on the expertise of the investor.
  This bill, I think, moves us in the right direction as far as 
allowing those with expertise to invest. I also look forward to 
narrowing the definition of those or eliminating those from investing 
solely because they are wealthy. Just because you have a million 
dollars does not mean that you have understanding or knowledge.
  The accredited investor framework protects the general public from 
being sold high-risk, illiquid private securities. This is because 
private securities do not come with anywhere near the same level of 
financial or other disclosures to investors that public securities do. 
Nor do private securities come with the same legal protections for 
investors and oversight from the SEC and State regulators as compared 
to public securities.
  Finally, they don't come with the same level of liquidity and ability 
to sell or a posted price where you can be assured that there is a big 
public market, and you know what the fair price is.
  Both accredited investor bills being considered on suspension today 
aim to return to this concept of accredited investor but focus on the 
knowledge of the investor as to the high-risk nature of the 
private security offering.

  We all know that just because you have a million dollars does not 
mean you understand the complexities of the private markets.
  Conversely, you should not be prohibited from investing in these 
products if you do have knowledge of the risks involved but don't 
happen to have a million dollars.
  This is why it is so important for the SEC to update its definition 
of accredited investors to protect investors who are not sufficiently 
informed while creating pathways for those who are or those who make 
themselves sufficiently knowledgeable.
  Mr. Hill's bill would allow individuals with certain credentials, 
such as an MBA or a FINRA certification--that is a certification from 
the Financial Industry Regulatory Authority that would allow one to 
actually be a broker-dealer. People who meet those two qualifications 
would be deemed accredited investors without reference to their income 
or wealth.
  I am under no illusion about the riskiness of these products. We will 
all hear the stories. Every friend I have who goes to Vegas and tells 
me about it, comes back saying they won everything. I have nine other 
friends who go to Vegas. They never tell me how well they did.
  Likewise, we all will hear about somebody who invested in Apple at 
the beginning, but nobody talks about their investment in pear, 
tangerine, or kumquat.
  This is an opportunity to make a lot of money. It is also an 
opportunity to lose a lot of money. I believe that the reforms to the 
definition of accredited investors are necessary and fair, and this 
bill is a reasonable expansion of the definition of people who can be 
expected to have the requisite knowledge or expertise to make an 
informed investment about the very risky private securities.
  I support this bill. Every voice on the committee supports this bill, 
and I urge my colleagues to vote for it.
  Mr. Speaker, I reserve the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Arkansas (Mr. Hill), the author of this bill, who is 
also the chairman of the Digital Assets, Financial Technology and 
Inclusion Committee.
  Mr. HILL. Mr. Speaker, I certainly thank Chair Wagner and Ranking 
Member Sherman for their strong words of support for my bill, the Fair 
Investment Opportunities for Professional Experts Act, which, as 
Ranking Member Sherman noted, passed out of our committee unanimously 
by voice vote, but it also has passed this House of Representatives, 
Mr. Speaker, twice already.
  Most Americans are prohibited from investing in a wide variety of 
businesses. Unless you are rich enough, or what is called by the SEC, 
an ``accredited investor''--meaning that you make more than $200,000 
per year or you are worth at least a million dollars, not including 
your house--you are not really allowed to easily invest in private 
markets, only in our public companies.
  Meanwhile, new businesses are staying private for longer because bad 
policy from Washington has made it increasingly expensive for companies 
to become public, to go public, and to remain a public company.
  In my view, Mr. Speaker, that is not fair, and it is not smart. The 
current accredited investor rules favor the rich and the affluent over 
people who have knowledge, that are working maybe in their own area of 
expertise, and then it effectively discriminates against someone who 
would be poor or potentially in a minority community.
  In fact, the Securities and Exchange Commission argues that 1.3 
percent of accredited investors are African American, and only 2.8 
percent are Latino, even though they make up a third of our country.
  Are you telling me they don't have the investment expertise or the 
knowledge to invest in a company they are interested in? Of course, 
they do.
  Small businesses and startups in Arkansas and across the country are 
integral to our Nation's economic growth, innovation, and job creation.
  From my years of experience in helping small firms raise capital, I 
know this bill will enhance capital formation and offer long-term 
wealth appreciation for those with the knowledge to apply it.
  This legislation simply provides individuals who demonstrate a strong 
understanding of an offering the opportunity to invest in private 
offerings. This is good for Arkansas and good for entrepreneurs across 
our country.
  This is about giving those previously limited to only investing in 
public market opportunities a chance to build savings and investment 
and wealth in private companies.
  If you have the knowledge and expertise, you ought to be given the 
chance to invest in an industry that you know very well.
  Mr. Speaker, I thank the gentleman from California (Mr. Vargas) as 
well as the gentleman from Arizona (Mr. Schweikert), an original 
cosponsor of this bill, for their support of this legislation. I thank 
the ranking member and the chairwoman for their support, and I urge all 
my colleagues to vote for this bill.
  Mrs. WAGNER. Mr. Speaker, I reserve the balance of my time.

                              {time}  1615

  Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume.
  The accredited investor framework is in need of improvement. Today, 
millions of families can be targeted to invest in high-risk, illiquid, 
nontransparent financial products solely because of the inflated value 
of their assets, putting at risk their ability to live comfortably in 
retirement. At the same time, others who are knowledgeable are 
prevented from investing.
  When the accredited investor framework was first established by the 
SEC in 1982, less than 2 percent of our population could be solicited 
by broker-dealers or companies raising capital on the basis of their 
income or on the basis of their assets.
  Today, that has risen to 20 percent. That is not because investors 
are more knowledgeable and it is really not because there are more 
investors who can afford to take major losses. It is simply because we 
have had a lot of inflation since 1982, and so you can meet the asset 
requirements with real estate and your retirement nest egg.
  To be clear, no one thinks that the amount you need for your 
retirement in 2023 is the amount you needed in 1982. That is why the 
SEC needs to revise the thresholds to better protect working families.

[[Page H2719]]

  That said, Mr. Hill's bill is sensible. It would return to the 
original concept of the accredited investor, focusing on investors who 
are knowledgeable about the risks of private securities.
  I would also point out that while we are protecting investors, 
another function of our securities laws is to help companies raise 
capital and, obviously, this bill will help many companies to raise the 
capital they need to expand; so I believe that is a balanced bill.
  I look forward to other steps to change the accredited investor 
framework. I urge my colleagues to support this bill, and I yield back 
the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I would just simply urge my colleagues to 
support H.R. 835, and I yield back the balance of my time.
  Ms. JACKSON LEE. Mr. Speaker, I rise today in support of H.R. 835, 
the Fair Investment Opportunities for Professional Experts Act.
  H.R. 835 would expand the eligibility criteria for an accredited 
investor for purposes of participating in private offerings of 
securities to include an individual determined by the Securities and 
Exchange Commission (SEC) to have qualifying professional knowledge 
through educational or professional experience.
  The current definition of an accredited investor relies on a net 
worth threshold for individuals and households irrespective of the 
sophistication of the would-be investors.
  Traditionally, the accredited investor threshold has been determined 
through asset and income tests, resulting in both an under- and 
overinclusive definition that leaves out sophisticated investors who 
may not meet financial thresholds while including a wealthy person with 
no experience in financial markets.
  Excluding these individuals unfairly limits Americans' participation 
in capital markets.
  This bill would increase the total number of Americans eligible to 
purchase restricted securities.
  H.R. 835 would amend the Securities Act of 1933 to codify certain 
qualifications of individuals as accredited investors for the purposes 
of the securities laws.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from Missouri (Mrs. Wagner) that the House suspend the 
rules and pass the bill, H.R. 835, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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