February 3, 2014
I am writing this letter with the proposal of changing the rules and requirements for being an accredited investor. Un-accredited investors should be allowed to test into accreditation. This can be achieved by passing a knowledge-based exam about investing in startups and other emerging markets. This would allow issuers and un-accredited investors to enjoy the benefits of Title IIIs crowdfunding provisions while under Title II.
The rationale behind this is suggestion is that although Title III will open up to allow un-accredited to invest there are too many costly compliance requirements under Title III. If previously un-accredited investors can test into accredited status, there will not be a need to have Title IIIs caps and restrictions. By taking this exam, previously un-accredited investors will prove that they have the understanding to protect themselves. Startup companies and other issuers will also benefit because they could securities to previously un-accredited investors without many of the costs expected to come with Title III.
One of the purposes of Title III is to open up to a large potential source of capital (un-accredited investors) however, if there are too many transactions costs, they might turn away from crowdfunding and thus still not invest in startups and other issuers. Therefore, I have concluded that in order to utilize the potential of allowing un-accredited investors to invest, we should allow them to take an exam to prove that they have the knowledge to exercise the same benefits of an accredited investor and thus acquire securities under Title II.