SEC Reviews ''Accredited Investor'' Definition Relating to Natural Persons
The SEC Divisions of Corporation Finance and Economic and Risk Analysis analyzed various approaches for modifying the definition of an "accredited investor." Under the Dodd-Frank Act, the SEC must review this definition as it applies to natural persons every four years. The Divisions' recommendations for methods to revise the definition included: The SEC should allow individuals to qualify based on other measures of financial sophistication:
Commentary
On first blush, the notion of a written examination to test status as an "accredited investor" seems an eccentric one. But as the SEC's report points out (at page 65), there are a good number of examinations already in use for professional licensing that could be good starting points. As numerous studies have shown, the level of financial knowledge in this country is remarkably low. As a result, the level of public discussion over how to regulate the businesses that drive the economy suffers. This may contribute not only to bad investment decisions, but also to bad law. While it is wishful thinking that an "accredited investor" test could provide some large benefits in the form of the financial education of the public as a whole, or investors in particular, perhaps it will at least provide some small benefit.