WASHINGTON, D.C. (December 18, 2019) – The following is a statement from Christopher W. Gerold, President of the North American Securities Administrators Association (NASAA) and Chief of the New Jersey Bureau of Securities, regarding a rule amendment proposed by the U.S. Securities and Exchange Commission related to the “accredited investor” definition. This definition helps determine whether investors have the financial wherewithal and understanding to be sold high-risk and unregistered private securities offerings.

“NASAA has long called for the modernization of the accredited investor definition. Today’s proposal offers several changes to the definition, but few if any improvements, and clearly misses an opportunity to provide meaningful reform to this outdated standard. By proposing to further expand access to private markets through increasing the number of accredited investors, the SEC’s proposal threatens to further erode the public markets. It also exposes far more retail investors to the significant potential harms associated with unregistered, illiquid offerings that have no ongoing disclosure obligations to shareholders.

“Today’s proposal also fails to address the impact of nearly 40 years of inflation on the minimum individual net worth and income thresholds for investors eligible to be sold private offerings. It is stunning that the Commission’s proposal did not include a provision to index these adjusted amounts to account for inflation going forward, a common-sense reform that has the strong bipartisan support of Congress.

“NASAA looks forward to working with the Commission and Congress to develop an accredited investor framework that improves our private markets rather than simply growing them, and that ensures those who need the investor protections provided by registration are not left to fend for themselves.”

– NASAA