In recent weeks, President Trump has taken measures to attract investments to the United States. Its proposed gold card would allow foreign investors to buy a legal status in the United States for $ 5 million. In his joint speech to Congress, he praised a direct investment of $ 200 billion of Japan’s softban.
While there is nothing wrong with requesting offshore investment, a key source of investment in the home is missing. The accredited rule of investors, which says that people must have a net worth of more than $ 1 million, or an annual income that exceeds $ 200,000, excludes too many Americans from our most lucrative stock markets. It’s time to change that.
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In the United States, values are widely divided into two categories: public and private. Public values trade freely for national exchanges and are open to all investors, but are extremely burdensome to issue. Companies are required to navigate the extensive regulatory and compliance requirements to “make public.” Their alternative is to stay private, and many companies like Stripe and Spacex choose to do that precisely.
Private markets, however, come with a capture. In exchange for facilitating the burden of regulation, they restrict access to accredited investors. This means that 80% of US households that do not qualify are effectively excluded. As more companies choose to stay private, more everyday Americans are prevented from generating wealth next to them.
In the old days, public markets were the deepest and most reliable capital sources for large high growth companies. This was excellent for the public, because it meant that they had access to the best investments. However, times have changed.
According to the SEC Commissioner, Hester Peirce, “the aspiration goal to become a public company seems to have lost its brightness.” In recent years, private markets have grown approximately twice the rate of global public capital markets.
And a single rule of the SEC is the fault.
The accredited rule of the investor
The proven investor rule, 17 CFR § 230.501 (A), is a regulation of the SEC that restricts access to private investments. It establishes criteria that investors must meet to participate in offers such as the D regulation, the primary exemption used by private companies to raise capital. Indeed, the rule prevents millions of Americans from investing in the most promising companies.
The defenders defend this rule openly. “Knowledge cannot protect people from potential losses … Only financial resources can,” said Patrick Woodall, director of American policies for financial reform The Wall Street Journal last year.
We do not agree. This paternalistic vision assumes that the public must be “protected” of itself. But the proven rule of investors does not protect the public. It blocks them to invest in companies that shape the future as openai, anthropic and perplexity.
The test
Last year, Senator Tim Scott sponsored the Main Street in America Empowerment Law (EMSAA), proposing, among other things, a proof Accredited definition of the investor.
A trial policy has clear advantages. First, it’s fair. Any American who passes can invest. Secondly, broader access to private markets allows more Americans to share the country’s economic success. If we are building here, everyone should be able to buy. Third, expanding private markets makes them more useful.
But the Senator Scott’s bill is unnecessary: a rule of investors accredited by evidence does not require new legislation. The SEC already has the power to implement it through Sec. 2 (A) (15) of the Values Law of 1933. Because of this, it is unlikely that an amendment to the rule on these reasons will find significant legal resistance. When modifying the accredited rule of investors, the SEC can remodel private markets through the regulations alone. I should start tomorrow.
