[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.

                          ____________________