[Congressional Record Volume 169, Number 97 (Monday, June 5, 2023)]
[House]
[Pages H2719-H2721]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ACCREDITED INVESTOR DEFINITION REVIEW ACT
Mrs. WAGNER. 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.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1579
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 ``Accredited Investor
Definition Review Act''.
SEC. 2. CERTIFICATIONS, DESIGNATIONS, AND CREDENTIALS UNDER
THE DEFINITION OF ACCREDITED INVESTOR.
Section 2(a)(15) of the Securities Act of 1933 (15 U.S.C.
77b(a)(15)) is amended--
(1) by redesignating clauses (i) and (ii) as subparagraphs
(A) and (B), respectively;
(2) in subparagraph (A), as so redesignated, by striking
``adviser; or'' and inserting ``adviser;'';
(3) in subparagraph (B), as so redesignated, by striking
the period at the end and inserting ``; or''; and
(4) by adding at the end the following:
``(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).''.
SEC. 3. PERIODIC REVIEW OF CERTIFICATIONS, DESIGNATIONS, AND
CREDENTIALS.
Section 413(b) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (15 U.S.C. 77b note) is amended by
adding at the end the following:
``(3) Periodic review of certifications, designations, and
credentials.--Not later than 18 months after the date of the
enactment of this paragraph and not less frequently than once
every 5 years thereafter, the Commission shall--
``(A) review the list of certifications, designations, and
credentials accepted with respect to meeting the requirements
of the definition of `accredited investor' under section
2(a)(15) of the Securities Act of 1933 (15 U.S.C. 77b(a)(15))
and rules issued pursuant to such section;
``(B) add such certifications, designations, and
credentials to such list as the Commission determines are
substantially similar in measuring the financial
sophistication, knowledge, and experience in financial
matters of an individual to the certifications, designations,
and credentials included on such list at the time of such
review; and
``(C) adjust or modify such list as the Commission
determines necessary or appropriate in the public interest or
for the protection of investors.''.
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. 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. SHERMAN. 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
[[Page H2720]]
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.
Mrs. WAGNER. 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. HUIZENGA. 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.
Mrs. WAGNER. Mr. Speaker, I reserve the balance of my time.
Mr. SHERMAN. 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.
{time} 1630
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.
[[Page H2721]]
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.
Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support
H.R. 1579, and I yield back the balance of my time.
Ms. JACKSON LEE. 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.
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. 1579, 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.
____________________