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The U.S. Securities and Exchange Commission (SEC) has amended the definition of accredited investors, such as to include those with proven financial knowledge. The broader definition will enable more people to invest in private offerings of cryptocurrency investments.
SEC’s New Accredited Investor Definition
The SEC announced Wednesday that it has adopted amendments to the definition of “accredited investor.” The new, broader definition will open up many cryptocurrency investments previously available only to high-net-worth individuals and institutional investors to more buyers. Grayscale Investments’ cryptocurrency products, for example, are available to accredited investors.
SEC Chairman Jay Clayton commented:
For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth, but also based on established, clear measures of financial sophistication.
The SEC has also “expanded and updated the list of entities, including tribal governments and other organizations, that may qualify to participate in certain private offerings,” Clayton continued.
The amendments “add a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution, which the Commission may designate from time to time by order,” the SEC detailed. Holders in good standing of the U.S. Series 7, Series 65, and Series 82 licenses are qualifying natural persons. The SEC added that “Members of the public may wish to propose for the Commission’s consideration additional certifications, designations or credentials that satisfy the attributes set out in the new rule.”
The amendments also “include as accredited investors, with respect to investments in a private fund, natural persons who are ‘knowledgeable employees’ of the fund,” the Commission noted. The changes will become effective 60 days after publication in the Federal Register.
Crypto-friendly SEC Commissioner Hester Peirce, often known as crypto-mom, said the definition expansion “is a step in the right direction.” However, she expressed: “It does not assuage my concerns … Why should I, as a regulator, decide what other Americans do with their money?” She tweeted:
Americans shouldn’t have to ask the SEC for permission to invest, but today’s accredited investor rule at least offers people a path to ask permission based on their education, rather than simply telling them ‘no, unless you’re rich.’
“The alleged justification is investor protection,” Peirce continued. “People can’t lose their money on investments if they aren’t allowed to invest. Yes, that is true, but where does that principle take us? Someone who does not invest at all will not lose any money on investments.”
The commissioner believes that the people will still lose. “She will lose the opportunity to see her money grow more than it could sitting in a bank account. She will lose the opportunity to be part of enterprises that she believes will transform society. And she will lose her right to make decisions for herself,” Peirce opined. Her term at the SEC has recently been extended.
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