A bill changing the accredited investor definition has cleared one congressional hurdle, paving the way for expanded investor access into the private markets.
On Monday, the House of Representatives passed the “Fair Investment Opportunities for Professional Experts Act,” sponsored by Financial Services Committee Chairman French Hill (R-Ark.). The bill passed in an overwhelming 397-12 vote.
Hill originally introduced the bill in 2023 and 2024, during prior sessions of Congress when Republicans did not hold both houses (or the White House). During a FINRA conference this spring, Hill said there was a “bipartisan consensus for broadening who is an accredited investor” and what opportunities should be available to non-institutional clients.
Unlike retail investors, accredited investors can access private markets, including hedge funds and private equity funds. Institutional investors are allowed in the space, but currently, retail investors must hit wealth thresholds to qualify (at least $200,000 in annual income or more than $1 million in net worth).
Hill’s bill hopes to change that by expanding the accredited investor definition in the 1933 Securities Act to include individuals with “certain licenses, education or job experience” beyond wealth and income thresholds. While threshold supporters claim it protects middle-class investors from risky private markets, its critics argue the rule means retail investors have missed out on a drastic expansion of private markets.
Hill’s bill was one of two launched in the GOP-controlled House of Representatives. U.S. Rep. Mike Lawler (R-N.Y.) co-sponsored legislation directing the SEC to create a test (administered by FINRA) that retail investors could take to qualify as accredited investors. That bill cleared the Financial Services Committee and is on the congressional calendar (though this doesn’t mean a vote on it is assured).
Banrion Capital Management CEO Shana Orzyk Sissel didn’t expect much immediate impact if the bill passes the Senate and is signed into law by President Donald Trump, as the more the accredited investor definition is expanded, “the less it means anything.”
“The definition of accredited investor keeps moving, and many asset managers and advisors are confused about exactly who qualifies, so that will be another learning curve as well if this passes,” she said.
Sissel expected that many asset managers would stick with non-registered products due to the cost of creating new funds specifically for accredited investors who couldn’t meet the minimum requirements placed on those products (even if the wealth threshold changes for the definition).
“Some advisors could create feeder funds for their accredited investor clients that then feed into alts products, but that can come with significant expense,” she said.
In the 2010 Dodd-Frank Act, Congress asked the SEC to examine the threshold’s applicability consistently (and whether the annual income and net worth thresholds established in 1982 still make sense today). The commission voted to expand the definition in 2020 to allow individuals to qualify if they had certain professional designations or credentials (and also qualified SEC- and state-registered advisors).
However, the monetary thresholds remained unchanged, although new SEC Chair Paul Atkins has previously emphasized the importance of expanding investor access to private markets.
Sissel stressed that even if the bill passes, advisors should tread carefully, as their fiduciary duties still apply, and understand how to build portfolios, including alts, that make sense for clients’ risk tolerance.
“Many alts aren’t complicated, but depending on their structures, liquidity constraints and other risks need to be communicated appropriately so investors have a clear set of expectations,” she said. “There are some (asset) managers with very good marketing teams, but have bad products out there, so sifting through all the noise is important.”
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