October 19, 2014
The purpose of the recent JOBS Act was to open up the private markets for investors. Making accreditation requirements any stricter would serve the opposite purpose.
The recent exclusion of the primary residence from the net worth calculation was already a big change, and there doesnt seem to be any evidence that the private placement industry is in need of further reform.
Other countries like the U.K. seem to be doing fine with more lenient regimes. There,for private equity investments, the FCA has certain income and net worth tests – which, it should be noted, are actually lower threshold amounts than those in the U.S. Unlike the SEC, however, the FCA also allows individuals to complete an exam -- an "appropriateness test" -- that is tailored by the issuer based on the specific investment and the associated risks.
An individual's ability to understand the risks of investment should be measured not by their finances but by their financial understanding. It's notable that the private placement industry in the United Kingdom, in particular with respect to debt instruments and peer-to-peer lending, is growing at an exponential rate – and yet investor fraud there remains almost non-existent.
The addition of stricter / additional conditions on the definition of "accredited investor" could clearly have negative effects on the economy. The SEC should seriously consider loosening the existing restrictions -- or to at least include other criteria, such as financial knowledge, investment sophistication, and past experience.