In recent weeks, President Trump has taken action to draw investments in the United States. Its proposed gold card would allow foreign investors to buy legal status in the United States for $ 5 million. In his spouse in the congress, he praised a direct investment of $ 200 billion in the Japanese Bank.
Although there is nothing wrong with soliciting offshore investments, the government is missing a source of key investment at home. The rule of accredited investors – which says that individuals must have a net value of more than a million dollars, or an annual income exceeding $ 200,000 – stops too many Americans from our most lucrative securities markets. It’s time to change this.
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In the United States, titles are largely distributed in two categories: public and private. Public titles are freely negotiated on national exchanges and are open to all investors, but they are extremely expensive to issue. Companies are required to navigate the vast regulatory and compliance requirements to “become public”. Their alternative is to stay private, and many companies like Stripe and SpaceX choose to do exactly that.
Private markets, however, are delivered with a socket. In exchange for the relaxation of the burden of the regulations, they restrict access to accredited investors. This means that 80% of American households that are not eligible are actually excluded. While more and more companies choose to stay private, more American Americans are prevented from building wealth by their side.
In the past, public procurement was the deepest and most reliable sources of capital for large high -growth companies. It was great for the public because it meant they had access to the best investments. However, times have changed.
According to the SEC Commissioner, Hester Peirce, “the formerly ambitious objective of becoming a public enterprise seems to have lost its brilliance.” In recent years, private markets have increased around double the rate of public stock markets.
And only one dry rule is to blame.
The rule of accredited investors
The rule of accredited investors, 17 CFR ยง 230.501 (a), is a SEC regulation which restricts access to private investments. It establishes criteria that investors must meet to participate in offers such as regulation D, private companies of main exemption use to increase capital. Indeed, the rule prevents millions of Americans from investing in the most promising companies.
The defenders openly defend this rule. “Knowledge cannot protect people from potential losses … Only financial resources can,” said Patrick Woodall, Director of Policy at Americans for Financial Reform The Wall Street Journal Last year.
We do not agree. This paternalistic point of view supposes that the public must be “protected” by himself. But the accredited investor rule does not protect the public. He locks them up by investing in companies that shape the future as Openai, anthropic and perplexity.
The test
Last year, Senator Tim Scott sponsored the Actorial of American Stone Maine (Emsaa), offering, among other things, a test Definition of accredited investors.
A test policy has clear advantages. First of all, that’s right. Any American passing can invest. Second, wider access to private markets allows more Americans to share the country’s economic success. If we build here, everyone should be able to buy. Third, the expansion of private markets makes them more useful.
But Senator Scott’s bill is not necessary – a Test -In investors’ accredit rule does not require new legislation. The dry already has the power to implement it via dry. 2 (a) (15) of the Securities Act of 1933. For this reason, it is unlikely that an amendment to the rule for these reasons encounter significant legal resistance. By modifying the rule of accredited investors, the SEC can reshape private markets by the rule. It should start tomorrow.
