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SEC Easing Restrictions on Accredited Investor Status

December 19, 2019
Sharon Moran


SEC Easing Restrictions on Accredited Investor Status

In a press release published today, the United States Securities and Exchange Commission voted to change how the term accredited investor is defined. Currently, income or net worth form the sole basis of determining whether an individual is considered an accredited investor. If an individual does not meet specific high minimum yearly income or have a high net worth, he or she is essentially out of luck when it comes to having access to certain investments restricted to accredited investors.

The proposed amendments aim to take into account different qualification categories based on professional knowledge, experience, certifications. Some of the professional certifications that will be potentially be considered include a Series 7, 65, or 82 license or “other credentials issued by an accredited educational institution.”

The proposed changes also would increase the number of entities or institutions that can qualify as accredited investors.

The current requirements defined by the SEC for an individual to be recognized as an accredited investor include an income greater than $200,000 for the previous two consecutive years or joint spousal income greater than $300,000 or an individual or spousal joint net worth exceeding $1,000,000.

From the press release, 

“The proposed amendments would allow more investors to participate in private offerings by adding new categories of natural persons that may qualify as accredited investors based on their professional knowledge, experience, or certifications. The proposal would also expand the list of entities that may qualify as accredited investors by, among other things, allowing any entity that meets an investments test to qualify.”

The longstanding precedent behind the accredited investor designation centers around the ability of an individual to sustain potential losses. Presumably, individuals with a higher income and/or higher net worth can sustain potential losses with less negative impact overall. 

Effects of Proposed Changes on Blockchain and Cryptocurrency

When blockchain companies conduct ICOs that offer security tokens, they are typically restricted to accredited investors, so any ease in restrictions such as those currently proposed would expand the potential number of individuals eligible to invest, as long as they meet the new established criteria.

As always, interested individuals who do not qualify for accredited investor status for newly launching security tokens can still acquire bitcoin or other cryptocurrencies through any number of centralized and decentralized exchanges or acquire cryptocurrencies that use a proof-of-work consensus algorithm via mining individually or joining a mining pool.

The SEC’s current proposal is subject to a public comment period spanning 60 days. Interested individuals can send a comment to [email protected] or use the submission form on the SEC website.