TheCorporateCounsel.net

The Wall Street Journal reported this week on a proposed Senate bill that would allow any investor capable of passing an exam to more easily invest in private companies. The legislation from Senate Banking Committee Republicans would allow the SEC or another regulator to write an exam to test “financial sophistication,” with the specifics of the exam left open for the agency to decide. Critics argue that only financial resources protect investors from the losses of risky investments.

The article reviews other attempts to change the rules to focus on knowledge and investing acumen but says this latest proposal is unlikely to get very far unless Republicans win more seats in November. But politicians aren’t the only group that’s pitched this concept in recent months. As a reminder, the Small Business Capital Formation Advisory Committee met to discuss the accredited investor definition (again) last March and voted to approve three recommendations to present to the SEC. One of those recommendations suggested that non-accredited investors be permitted to invest up to 5% of their income or net worth in private offerings annually if they meet certain sophistication criteria or pass a certification exam.

– Meredith Ervine