Dear Chair Gensler:
The U.S. Chamber of Commerce (the “Chamber”) writes to comment on the Securities and Exchange Commission (the “SEC” or “Commission") December 2023 Staff Report entitled “Review of the ‘Accredited Investor’ Definition under the Dodd-Frank Act” (the “Report”).
The Chamber is concerned with any changes to the accredited investor definition that will inequitably reduce the pool of persons deemed accredited investors. Such changes would limit options for investors and adversely impact the capital formation ecosystem at a precarious time for the American economy. According to the SEC’s Fall 2023 Unified Agenda of Regulatory and Deregulatory Actions, the Commission appears to be contemplating updates to the accredited investor definition in conjunction with a proposed rulemaking relating to Regulation D and Form D improvements (slated for April 2024).2 The Chamber urges the SEC to expand, not further restrict, the definition of the accredited investor.
The Chamber recognizes the need for strong public and private capital markets. The private offering market, particularly under Regulation D, is an attractive vehicle for businesses to raise capital and investors to grow with them. Both Congress and the SEC have taken steps over the years, particularly since the Jumpstart Our Business Startups (JOBS) Act of 2012, to expand or create new exemptions from registration to promote capital formation and increased investment opportunities, while maintaining investor protections. While the Chamber has generally supported these efforts and commends the Commission for the amendments to the accredited investor definition it approved in 2020, we believe there are additional efforts the Commission can undertake to facilitate capital formation by further expanding the accredited investor definition.
Fewer companies are going public, and for those that do, it is much later in their lifecycle. When companies go public at a relatively mature age, many of the early-stage returns generated by those businesses accrue only to investors allowed to invest in private offerings. Qualifying as an accredited investor is significant because it permits an individual to participate in private investment opportunities not available to non-accredited investors. Furthermore, the vast majority of companies are private, not public, and there is a societal interest in enabling people to help support, fund, and grow with these businesses.
One recurring topic with respect to the definition of accredited investor is whether the income or net worth dollar amounts should be indexed for inflation. The Report noted that the SEC has substantively amended the definition four times since the adoption of Regulation D in 1982, including at the behest of Congress by excluding the value of an individual’s primary residence when calculating net worth.3 We are concerned that a significant portion of the Report is devoted to providing different methodologies for inflation-adjusting the various financial criteria for qualifying as an accredited investor. We believe inflation-adjusting the dollar thresholds for achieving accredited status is misguided.
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