Accredited Investor Definition Review Act
- Sponsor
- Rep. Huizenga, Bill [R-MI-4]
- Committees
- Financial Services Committee (primary)
- Last action
- Jun 4, 2025
Bottom line
This bill broadens who qualifies as an "accredited investor" by adding professional certifications as a criterion, aiming to allow more financially sophisticated individuals to participate in private securities offerings.
What it actually does
This bill amends the Securities Act of 1933 to expand the definition of an "accredited investor" to include individuals who hold certain professional certifications, designations, or credentials as determined by the Securities and Exchange Commission (SEC). It also mandates that the SEC periodically review and update this list of qualifying credentials to ensure it remains current and inclusive.
Proponents argue
Proponents argue that the current definition of "accredited investor," primarily based on income and net worth, is outdated and unfairly excludes financially sophisticated individuals who do not meet arbitrary wealth thresholds. They contend that professional certifications demonstrate sufficient knowledge and experience to understand the risks of private investments, thereby democratizing access to capital markets for a broader range of investors and fostering capital formation.
Opponents contend
Opponents might argue that expanding the definition beyond wealth thresholds could expose less affluent investors to higher risks associated with private markets, which lack the same regulatory protections as public markets. They may contend that professional certifications alone do not guarantee the ability to absorb potential losses, and that the primary purpose of the accredited investor definition is robust investor protection.
The bill text is very short and can be read quickly, allowing ample time for stakeholders to understand its provisions and implications.
Section 2, amending Section 2(a)(15) of the Securities Act of 1933
Expansion of Accredited Investor Definition to Include Professional Certifications
This provision amends the Securities Act of 1933 to allow individuals holding specific professional certifications, designations, or credentials, as determined by the Securities and Exchange Commission (SEC), to qualify as accredited investors. It explicitly requires the SEC's list to include those professional certifications already designated in an October 2020 SEC order and mandates that the criteria for establishing new credentials be no less broad than those used in the 2020 final rule on the Accredited Investor Definition.
Supporters argue
Supporters argue this provision modernizes the accredited investor definition by recognizing financial sophistication beyond wealth, allowing more knowledgeable individuals to access private markets and fostering capital formation for growing businesses.
Critics contend
Critics may argue that professional certifications, while indicating knowledge, do not necessarily equate to the financial capacity to absorb losses inherent in private investments, potentially exposing more individuals to risk in less regulated markets.
Tradeoffs
The provision balances the goal of expanding access to private investment opportunities for financially sophisticated individuals against the risk of exposing investors with lower net worth to less regulated markets.
Section 3, amending Section 413(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
Mandated Periodic Review and Update of Accredited Investor Credentials
This section amends the Dodd-Frank Act to require the SEC to review and update its list of qualifying certifications, designations, and credentials for accredited investor status. This review must occur within 18 months of the bill's enactment and at least every five years thereafter. The SEC is directed to add credentials that are "substantially similar" in measuring financial sophistication and to adjust the list as deemed necessary for public interest or investor protection.