The U.S. Securities and Exchange Commission (SEC) has amended the rules associated with the definition of Accredited Investors in Rule 144A under the Securities Act of 1933.
The purpose of the amendments is to simplify, harmonize, and improve the existing investment structure in the framework and to expand investment opportunities for institutional and retails investors towards the capital formation.
Earlier, the investors to be accredited investors in the United States to qualify an investment test was obligatory. Though, now SEC has mentioned some relief for the citizens.
Generally, in the U.S. “Accredited Investors” or sophisticated investors own the special status under financial regulation laws. People who have at least $200,000 annually as a stable income, can only participate in the multifaceted private capital markets.
In a press release published on Aug 26, as per the new definition, now becoming an “accredited investor “ in the United States is not about only being rich. People can become accredited investors based on the merits, professional knowledge, experience, or certifications issued by the accredited institutions in addition to the existing tests for income or net worth.
Though, the amendments have not yet become effective until it publishes in the Federal Register and maintains 60 days of lock-in period after that.
The release notes:
“The amendments update and improve the definition to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in those markets.”
Chairman Jay Clayton says “Today’s amendments are the product of years of effort by the Commission and its staff to consider and analyze approaches to revising the accredited investor definition”… Now, “individuals will be permitted to participate in our private capital markets,”…“based on clear measures of financial sophistication.”…“we have expanded and updated the list of entities, including tribal governments and other organizations, that may qualify to participate in certain private offerings.”
The Background of Accredited Investors Definition
The decision has not come by chance, in June 2019, the SEC requested comments and approaches from various Commission advisory committee members and members of the public on its Concept Release on Harmonization of Securities Offering Exemptions. The concept release is also a result of a Commission staff report issued in December 2015 on the amendments over accredited investor definition. The release notes.
Crypto Leaders Getting Thoughtful on New SEC ‘accredited investor’ Rule
Reportedly, the SEC’s decision over the new amendments to being an “accredited investor” has seen many opinions and judgments of crypto pundits in a short time.
The new accredited investors’ definition expands opportunities for the cryptocurrency community in the U.S… Now investors can invest in the digital asset space regardless of their income status which can be a game-changer for small investors too.
Gemini cryptocurrency exchange co-founder while praising SEC’s new amendment posted on popular social media network-
Tyler Winklevoss also admired and said-
Likewise, a few said that the U.S. regulators are understanding the importance of changing scenario and need to adapt it at the earliest possible. Now the investment is not only limited to the rich and privileged other at the bottom level can also upscale.
This new change can become a boon for the cryptocurrency investment space and would readily open the prospects for future security token offerings.
The fresh amendment can bring the socio-economic inclusion to a great extent which would enable more investors to jump in the digital asset investment activities. Also, it can help smaller projects to establish their existence.
However, many are still skeptic-
The Co-founder & Partner at Morgan Creek Digital, Anthony Pompliano showed the concern and said SEC new amendments are great though the greater access and broader rules are still required for the greater public interest.
“Crypto has been one of the very few unregulated places all such people could participate without already being rich,” he says. “99% of the population has been excluded from getting access to the best innovation this country has to offer, so the question now is whether the regulators will require accreditation for retail users to do what they already do – or will the SEC let what is going on continuously.”