[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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