Bill Overview
Title: Equal Opportunity for all Investors Act
Description: This bill expands who may be considered an accredited investor for purposes of participating in private offerings of securities. Certain unregistered securities may only be offered to accredited investors. Specifically, the bill allows an individual to qualify through an examination established by the Securities and Exchange Commission (SEC), a state securities commission, or certain self-regulatory organizations. The examination must measure whether an individual understands and appreciates the risks and opportunities of investing in securities, must be designed to ensure that an individual with financial sophistication or training would be unlikely to fail, and may be designed and/or administered by an approved person. Currently, accredited investors must satisfy certain requirements indicating their reduced exposure to financial risk, including those related to income, net worth, or knowledge and experience. The bill also allows purchasers to self-certify that they meet the income or net worth requirements. Further, the bill allows a person to qualify as an accredited investor by satisfying certain investment or transaction requirements. Finally, the SEC may review and adjust the definition of accredited investor, except for the net worth standards, at its discretion. Currently, the SEC must perform this review every four years.
Sponsors: Sen. Tillis, Thomas [R-NC]
Target Audience
Population: Potential investors in private offerings of securities
Estimated Size: 26000000
- The bill impacts individuals who are potential investors in private securities offerings but don't meet the current criteria for accredited investors.
- By expanding who qualifies as an accredited investor, the bill potentially impacts those who have financial sophistication or training but do not exceed income or net worth thresholds.
- The bill affects financial markets and companies offering private securities by potentially increasing the pool of eligible investors.
- Currently, in the U.S., there are significant numbers of adults with financial education or low-level training who might now qualify as accredited investors under the new examination system.
Reasoning
- The bill expands the number of individuals eligible to invest in private offerings by altering the criteria for becoming an accredited investor.
- This could impact people based on financial literacy, education, and income, expanding opportunities for many currently non-accredited investors.
- The simulation involves individuals with varying degrees of financial sophistication; some will experience significant changes while others may not.
- Costs associated with implementing examinations and regulatory adjustments suggest the impact may be more pronounced for financially literate individuals.
- Given the large potential pool of 26 million, we target a mixture of high impact for specialized professions and low impact for individuals without financial backgrounds.
- Simulated interviews include younger financially educated individuals, mid-career professionals in finance, and retirees looking to diversify their portfolio.
Simulated Interviews
Financial Analyst (New York, NY)
Age: 29 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- I think this policy is great as it opens up investment opportunities for professionals like me who are knowledgeable but don't meet the wealth criteria.
- Passing the exam should not be difficult and it would expand my options significantly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Software Engineer (Austin, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- I'm interested in investing beyond public markets, and this provides a way to potentially access those opportunities.
- The ability to qualify through an exam sounds helpful, yet I worry about the complexity.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Teacher (Chicago, IL)
Age: 37 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I'm not heavily engaged in investing, but having the option is nice if I choose to pursue it.
- I'd need to learn more before attempting any examinations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Entrepreneur (San Francisco, CA)
Age: 55 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- The policy allows me to diversify further and potentially find new opportunities through self-certification.
- I welcome the flexibility, and it's about time income barriers were addressed.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Small Business Owner (Miami, FL)
Age: 32 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- Investment opportunities in private tech startups would be more accessible with this policy.
- I see this as a way to grow personal wealth by investing more broadly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Retired Financial Advisor (Portland, OR)
Age: 61 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- I can leverage years of experience to invest more directly without being restricted by current requirements.
- This is empowering for retirees like me who still wish to be actively involved in markets.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Graduate Student in Finance (Boston, MA)
Age: 24 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 9/20
Statement of Opinion:
- I see a clear path to becoming an accredited investor which aligns with my career objectives.
- Passing the qualifying exams seems entirely feasible with my background.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Non-profit Manager (Denver, CO)
Age: 40 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 14/20
Statement of Opinion:
- This policy might require me to initially assist myself in understanding further to pass any examinations.
- Being from a non-profit background, investment for personal gain isn't my top priority but is increasingly relevant.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Freelance Designer (Los Angeles, CA)
Age: 38 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- The barrier to entry has been a deterrent; this policy seems to help level the playing field.
- It would give me a chance to test investment strategies in private markets.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Accountant (Seattle, WA)
Age: 27 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- This policy would create more reasonable pathways to become involved in private equities.
- With more options, I can think about where and how to begin investing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $8000000)
Year 2: $4000000 (Low: $2500000, High: $7000000)
Year 3: $4000000 (Low: $2500000, High: $7000000)
Year 5: $4000000 (Low: $2500000, High: $7000000)
Year 10: $4000000 (Low: $2500000, High: $7000000)
Year 100: $4000000 (Low: $2500000, High: $7000000)
Key Considerations
- The policy's success depends heavily on the efficient implementation and administration of the examination system by the SEC and other bodies.
- Ensuring the integrity of self-certification processes to prevent fraudulently claiming accredited investor status.
- Potential resistance or lobbying by groups wishing to maintain the status quo on accredited investor qualifications.
- Balancing the broadened scope of accredited investors with sufficient investor protection and education.