February 25, 2002
Dear Mr. Jonathan G Katz, Secretary
U.S. Securities and Exchange Commission
Thank you for the opportunity to comment on the rulemaking proposal with reference to the Congressional preemption of state securities regulation over "covered securities." Please accept my compliments as this is one of the most well written request for comments that I have ever seen.
As an advocate for small business, there is no question in my mind that creating a single definition for "Accredited Investor" to replace and eliminate the term "Qualified Purchaser" and all its mutations subsequent to its genesis in the 33 Act will be beneficial to all businesses. I believe that this improvement will be good for all sizes of business and ultimately result in increased employment. It will reduce the costly burdens on capital growth across the board and eliminate confusion and uncertainty as to which and how many regulations a person or corporation is restricted by when attempting to grow. It can also eliminate the current subjectivity in determining a person's qualifications to participate.
We do not need, and no benefit is accomplished by having several categories of accredited investors except as distinguishing requirements for Natural Persons from organizations, institutions, or Broker/Dealers. Today, the Internet has expedited access to the critical information from which sophisticated investors can draw their conclusions. Once a person has adequately established himself or herself as being financially competent and sophisticated enough to be capable of researching offerings and protecting themselves, their transactions should be exempt from state "blue sky" laws. All should function under the name "Accredited Investor."
I believe that the accredited investor concept, i.e. a Natural Person earning over $200,000 a year or net worth over $1 million and a Non-Natural Person with a minimum of $5 million of assets . . . , as created in 1979 as part of former Rule 242, should be the standard - the only standard for qualification.
Accredited Investors should be allowed to invest in all securities - whether debt or equity type, whether listed or not, or whether in a public or private offering. They should be permitted to buy from and sell to other Accredited Investors without restriction.
When evaluating an application for a person to become an "Accredited Investor", only the net value of a person's investments should serve as a basis for qualification. If securities and other assets are bought on margin, only the net portion of ownership should influence or be part of a person's qualification to become an "Accredited Investor." Houses, autos, and retirement accounts must be excluded from net assets since these are assets normally obtained with minimal financial sophistication.
Earl Hall, President
Parkway Enterprises, Inc.
831 Parkway Avenue
Trenton, NJ 08618