Financial Advisor IQ (April 27, 2023) - The House Financial Services Committee passed several bills making it easier for investors to qualify as “sophisticated” or “accredited” in order to gain access to more complex securities, such as public placements.

The House Financial Services Committee approved several bills expanding retail investors’ access to unregistered securities and private placements, primarily through the expansion of the definition of “accredited investor.”

Among the bills approved is the Accredited Investor Definition Review Act, which would bestow the title on holders of certain certifications or credentials; the Equal Opportunity for All Investors Act, which aims to introduce a Financial Industry Regulatory Authority-administered test for “sophisticated-but-not-wealthy individuals” to qualify as accredited investors; and the Fair Investment Opportunities for Professional Experts Act, aimed at expanding the pool of accredited investors “to ensure that all Americans have an opportunity to participate in the growth and success of our economy.”

The Public Investors Advocate Bar Association took issue with the language of some of the bills.

While the advocacy group saw no issue in expanding the accredited investor definition to include licensed financial advisors, for example, it opposed lumping in all individuals who were solicited by an investment professional, Piaba president Hugh Berkson wrote in a letter Wednesday to Committee Chairman Patrick McHenry and Ranking Member Maxine Waters.

Piaba also opposed what it said was expanding protections for private placement brokers and finders as part of the Unlocking Capital for Small Businesses Act.

“Allowing unlicensed and untrained 'sellers' to broadly solicit the sale of this category of private investments to an even larger populace of retail investors is a catastrophe in the making,” Berkson wrote.

In addition, the group has called for amending the six bills that it claims aim to expand the definition of accredited investor to specifically require the Securities and Exchange Commission to study complaints related to private securities and the outcomes of such complaints, as well as disclosures of such complaints by registered investment advisor firms, and to make these studies available to the public.

InvestmentNews first reported on the passage of the bills.