The SEC Discusses the Definition of An Accredited Investor

The SEC Advisory Committee on Small and Emerging Companies is discussing the revision of the definition of “accredited investor” and will hold a public meeting by conference telephone call on February 17th, 2015. The meeting will begin at 2:00 p.m. ET and live audio will be available on the SEC’s website. The Advisory Committee’s vote follows its December 17, 2014 meeting which focused on the accredited investor definition.

The current definition of “accredited investor” does not necessarily comport with an individual investor’s level of sophistication. Patch of Land will often receive several emails and messages each week from users advocating for a different measurement of sophistication.

Patch of Land's CEO, Jason Fritton, spoke out about the issue by saying, "An individual’s net worth, or annual income, is no longer a valid measurement of their financial sophistication, and hasn't been for quite some time. People have unprecedented and enormous access to information in today’s world, and their personal wealth has minimal relationship as to whether they are able to make informed investing decisions. A person’s past financial or investment experience is a much more useful metric as to their ability to make smart choices for themselves."

Related Article: Patch of Land Leads the Way for 506(C) Filings for 2014

Notably, the public is invited to submit written statements for the meeting, including any comments. Written statements should be received on or before Friday, February 13, 2015.The Advisory Committee on Small and Emerging Companies provides a formal mechanism for the SEC to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. We strongly urge you to voice your opinions and be heard, much like the 18 crowdfunders who Forbes released a blog post about last year.

Dates & Submissions

• The public meeting will be held on Tuesday, February 17, 2015.
• Written statements should be received on or before Friday, February 13, 2015.

Written statements may be submitted by any of the following methods:

• Use the Commission’s Internet submission form
  • You can view all the submitted comments online to see what other people are saying.
• Or send an e-mail message to [email protected]
  • Please include File Number 265-27 on the subject line.

D.J. Paul, the chief strategy officer of New York-based real estate investment crowdfunding platform Propellr, is currently serving as a member of the Securities and Exchange Commission’s advisory committee on small and emerging companies. In a recent document written by Paul, he discussed redefining the 'accredited investor’ requirements stating, “Indeed, any attempt to further contract the limited number of eligible accredited investors would be disastrous for a variety of critically important industries that rely on the Regulation D market, including real estate, biotech/healthcare, technology and energy.” Paul's ideas and stance on the issue have many people excited to see what the outcome of this month's meeting will be.

With Title III of the JOBS Act still hanging in the balance, it will be interesting to see how the SEC decides to proceed with its definition of an accredited investor. Furthermore, how will it change the landscape of crowdfunding, particularly for companies filing under Regulation D Rule 506(c)? What are your thoughts regarding the definition? Leave a comment and let us know how you feel.