WASHINGTON, D.C.—Today, Rep. Warren Davidson (R-OH) introduced a bill to allow more investors to participate in private equity markets.
Due to antiquated securities laws, it is quite difficult and incredibly rare for non-accredited investors to participate in private equity offerings. Consequently, non-accredited investors are routinely forbidden from investing in companies during their growth years. This exclusion was arguably put in place to protect novice investors. However, to become an accredited investor, individuals must have an annual income exceeding $200,000 for at least two years, a net worth of $1 million, or be a registered stockbroker or investment advisor. This limiting definition of a “sophisticated” investor shuts most Americans out of the market and perpetuates unequal access to financial markets. Rep. Davidson’s bill eliminates these burdensome barriers to entry and ensures that working class Americans are not shut out of financial opportunities.
Rep. Davidson’s bill would allow Americans to sign a waiver acknowledging the risk associated with investing in the private market, democratizing markets, and allowing more investors to decide when and how to participate in a wider array of investment opportunities.
Upon introduction, Rep. Davidson remarked: “Over the past year we’ve seen an explosion in retail investing. Americans want to participate in financial markets, but outdated and arbitrary rules that amount to a wealth test—like the accredited investor rule—prevent them from participating in private equity markets. The government shouldn’t tell Americans when and how to invest their money. In the name of protecting working class Americans, we’re shutting them out of the market entirely. How is that the American Dream?
“Investors should be able to self-certify so that if they have sufficient funds and acknowledge the risk, they can invest in potentially life-changing opportunities. This will go a long way towards dispelling the sense that there are different rules for Wall Street and for Main Street.”
Due to antiquated securities laws, it is quite difficult and incredibly rare for non-accredited investors to participate in private equity offerings. Consequently, non-accredited investors are routinely forbidden from investing in companies during their growth years. This exclusion was arguably put in place to protect novice investors. However, to become an accredited investor, individuals must have an annual income exceeding $200,000 for at least two years, a net worth of $1 million, or be a registered stockbroker or investment advisor. This limiting definition of a “sophisticated” investor shuts most Americans out of the market and perpetuates unequal access to financial markets. Rep. Davidson’s bill eliminates these burdensome barriers to entry and ensures that working class Americans are not shut out of financial opportunities.
Rep. Davidson’s bill would allow Americans to sign a waiver acknowledging the risk associated with investing in the private market, democratizing markets, and allowing more investors to decide when and how to participate in a wider array of investment opportunities.
Upon introduction, Rep. Davidson remarked: “Over the past year we’ve seen an explosion in retail investing. Americans want to participate in financial markets, but outdated and arbitrary rules that amount to a wealth test—like the accredited investor rule—prevent them from participating in private equity markets. The government shouldn’t tell Americans when and how to invest their money. In the name of protecting working class Americans, we’re shutting them out of the market entirely. How is that the American Dream?
“Investors should be able to self-certify so that if they have sufficient funds and acknowledge the risk, they can invest in potentially life-changing opportunities. This will go a long way towards dispelling the sense that there are different rules for Wall Street and for Main Street.”