[Pages H2869-H2871]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS ACT

  Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 3394) to amend the Securities Act of 1933 to codify certain 
qualifications of individuals as accredited investors for purposes of 
the securities laws, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 3394

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fair Investment 
     Opportunities for Professional Experts Act''.

     SEC. 2. DEFINITION OF ACCREDITED INVESTOR.

       (a) In General.--Section 2(a)(15) of the Securities Act of 
     1933 (15 U.S.C. 77b(a)(15)) is amended--
       (1) by redesignating subparagraphs (i) and (ii) as 
     subparagraphs (A) and (F), respectively; and
       (2) in subparagraph (A) (as so redesignated), by striking 
     ``; or'' and inserting a semicolon, and inserting after such 
     subparagraph the following:
       ``(B) with respect to a proposed sale of a security, any 
     natural person whose individual net worth, or joint net worth 
     with that person's spouse or spousal equivalent, at the time 
     of such sale, exceeds $1,000,000 (which amount, along with 
     the amounts set forth in subparagraph (C), shall be adjusted 
     for inflation by the Commission every 5 years to the nearest 
     $10,000 to reflect the change in the Consumer Price Index for 
     All Urban Consumers published by the Bureau of Labor 
     Statistics) where, for purposes of calculating net worth 
     under this subparagraph--
       ``(i) the person's primary residence shall not be included 
     as an asset;
       ``(ii) indebtedness that is secured by the person's primary 
     residence, up to the estimated fair market value of the 
     primary residence at the time of such sale, shall not be 
     included as a liability (except that if the amount of such 
     indebtedness outstanding at the time of such sale

[[Page H2870]]

     exceeds the amount outstanding 60 days before such time, 
     other than as a result of the acquisition of the primary 
     residence, the amount of such excess shall be included as a 
     liability); and
       ``(iii) indebtedness that is secured by the person's 
     primary residence in excess of the estimated fair market 
     value of the primary residence at the time of such sale shall 
     be included as a liability;
       ``(C) any natural person who had an individual income in 
     excess of $200,000 in each of the 2 most recent years or 
     joint income with that person's spouse or spousal equivalent 
     in excess of $300,000 in each of those years and has a 
     reasonable expectation of reaching the same income level in 
     the current year;
       ``(D) any natural person who is--
       ``(i) currently licensed or registered as a broker or 
     investment adviser by the Commission, a self-regulatory 
     organization (as defined in section 3(a) of the Securities 
     Exchange Act of 1934), or the securities division of a State, 
     the District of Columbia, or a territory of the United States 
     or the equivalent division responsible for licensing or 
     registration of individuals in connection with securities 
     activities; and
       ``(ii) in good standing with respect to such licence or 
     registration;
       ``(E) any natural person the Commission determines, by 
     regulation, to have demonstrable education or job experience 
     to qualify such person as having professional knowledge of a 
     subject related to a particular investment, and whose 
     education or job experience is verified by a self-regulatory 
     organization (as defined in section 3(a) of the Securities 
     Exchange Act of 1934); or''.
       (b) Rulemaking.--Not later than 180 days after the date of 
     enactment of this Act, the Securities and Exchange Commission 
     shall revise the definition of accredited investor under 
     Regulation D (17 CFR 230.500 et seq.) to conform with the 
     amendments made by subsection (a).

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
Missouri (Mrs. Wagner) and the gentleman from California (Mr. Sherman) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from Missouri.


                             General Leave

  Mrs. WAGNER. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days to revise and extend their remarks and 
include extraneous material on this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from Missouri?
  There was no objection.
  Mrs. WAGNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in strong support of H.R. 3394, the Fair 
Investment Opportunities for Professional Experts Act.
  I thank our Financial Services Committee chairman, the gentleman from 
Arkansas (Mr. Hill), for his leadership on this bipartisan legislation.
  For decades, the SEC's accredited investor definition has served as a 
gatekeeper to private investment opportunities, relying almost entirely 
on income and net worth thresholds.
  This approach has excluded millions of Americans who may not meet 
those financial metrics but have the education, licenses, or 
professional experiences to make informed investment decisions.
  H.R. 3394 modernizes that definition. It directs the SEC to expand 
eligibility to individuals who hold certain professional 
certifications, relevant degrees, or job experience, criteria that 
actually reflect financial sophistication.
  This change is long overdue. It will unlock capital for small 
businesses, broaden investor participation, and better align our rules 
with how Americans build expertise and manage risk in today's economy.
  The bill maintains investor protections, while removing arbitrary 
barriers that have held back individual investors and early-stage 
entrepreneurs alike.
  Mr. Speaker, I urge my colleagues to support this commonsense reform, 
and I reserve the balance of my time.

                              {time}  1645

  Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to commend the gentlewoman from Missouri for all 
of her work chairing the Subcommittee on Capital Markets, but, 
particularly, for the hearings that we have had on this bill. I look 
forward to working with her on this subcommittee for many years to 
come.
  Mr. Speaker, I rise in support of H.R. 3394, the Fair Investment 
Opportunities for Professional Experts Act, offered by my friend and 
Financial Services Committee chair, French Hill. This bill is the first 
step in what I hope will be an effort to reform the definition of 
``accredited investor.'' This bill moves us to add to that definition 
by noting that certain experience, licenses, and education can, indeed, 
make one an accredited investor.
  At the same time, I will point out that our definition of 
``accredited investor'' was, I think, wrongfully decided that we should 
just focus on whoever is rich, then defined people as rich based on 
1983 numbers. While $1 million may have made you rich then, Mr. 
Speaker, it does not mean that you are rich today.
  I rise in support of this bill. The accredited investor framework has 
long protected the general public from investing in high-risk, illiquid 
private securities. Unlike our public capital markets, in the private 
capital markets, companies don't provide anywhere near the same 
financial and other disclosures to investors. There are not the same 
legal protections for investors either, nor is there the same ability 
of the SEC or the State securities regulators to police these markets.
  When the accredited investor framework was first being debated, 
accredited investors were thought to be those who possess an intimate 
understanding and knowledge of the risks inherent in investing in 
private securities. These risks include heightened volatility, less 
transparency, difficulty obtaining accurate pricing, long lockup 
periods, and limited liquidity.
  Ultimately, industry argued for a simpler approach, so the SEC 
adopted the current definition, which is based around income and 
wealth. Today, to be an accredited investor, the investor must have a 
net worth, either individually or, with spouse, exceeding $1 million 
excluding the value of their home, or they must make more than $200,000 
a year or $300,000 with a spouse.
  Those were definitions applicable in 1983 that may not have defined 
those with the requisite knowledge, but at least defined those who were 
high-income, high-net worth individuals. Of course, certain 
professional certifications or designations such as being an investment 
adviser could also qualify a person under the existing rules.
  The wealth and income thresholds, as I have said several times, were 
set back in 1983. Back then, roughly 2 percent of all Americans were 
considered accredited investors. As of 2023, that number had risen to 
20 percent. Clearly either the standard was wrong in 1983 or it is 
wrong now, because it is an entirely different level of real wealth and 
real income.
  Mr. Hill's bill aims to return back to the original concept of 
accredited investor, which is that investors in private offerings 
should be fully aware and knowledgeable of the risks involved.
  As my friend and ranking member of the Financial Services Committee, 
Ms. Waters, has said during our markup of this bill:

       Just because you have $1 million doesn't mean you 
     understand the complexities of the private markets. On the 
     other hand, you shouldn't be prohibited from investing in 
     products if you have full knowledge of the risks involved but 
     don't happen to have $1 million.

  I would add to that that our definition of ``accredited investors,'' 
when we are done improving it, and this bill is an important step 
toward improving it, should focus on what percentage of net worth a 
person is investing in the particular private offering or private 
offerings in general.
  That is because one may be accredited to invest 5 or 10 percent of 
their net worth, but when you start betting the mortgage payments on 
one private investment, Mr. Speaker, then that is where our definition 
of ``accredited investor'' should protect you from that. So there 
should be diversification and limitation on the amount that an 
accredited investor can invest in any one or in all private offerings.
  Nonetheless, that is for a different bill. This bill simply makes one 
important improvement in our definition of ``accredited investor.''
  It is critical for the SEC to revise and update the accredited 
investor definition to protect those who don't possess the proper 
knowledge or information about the risks of private unregistered 
securities. Mr. Hill's bill moves us in the right direction by 
indicating that certain credentials, such as someone with a master's in 
business administration, an MBA, or a FINRA certification, for example, 
should be deemed accredited without needing to meet income or wealth 
requirements. It also

[[Page H2871]]

reconfirms Congress' mandate to the SEC that it must adjust the wealth 
and income thresholds to account for inflation. This is the right 
balance.
  I look forward to passing this bill, and I look forward to our 
subcommittee and the full committee making other changes in the 
definition of ``accredited investor.''
  Mr. Speaker, I urge my colleagues to support this bill, and I reserve 
the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Arkansas (Mr. Hill), who is the chairman of the 
Financial Services Committee and the author of this bill.
  Mr. HILL of Arkansas. Mr. Speaker, I certainly thank our 
distinguished chair of the subcommittee, Mrs. Wagner of Missouri, for 
her daily leadership of our agenda to make America more competitive by 
having the most liquid, competitive capital markets in the world. These 
bills certainly take a step in that direction to support that goal. I 
thank my friend from California (Mr. Sherman) for his comments in 
support of the bill.
  The gentleman is right, Mr. Speaker. I think we have all learned in 
our lives that intelligence and wealth aren't directly correlated. This 
is another example of that, where people are held back from their 
ability to use their expertise and their knowledge just because they 
don't have a specific net worth. That is what H.R. 3394, the Fair 
Investment Opportunities for Professional Experts Act seeks to clarify.
  Many individuals, whether through work, education, or other 
experience, have the knowledge to make an informed investment decision, 
but they are excluded simply because of an income or net worth test.
  Before I was in Congress, I helped investors and founders start new 
companies and raise funds through regulation D private placements.
  I witnessed firsthand on an annual basis routinely how the current 
accredited investor definition impaired talented, knowledgeable 
innovators from fully participating up front in their business 
formation dream.
  This bill, with my good friend from California, Representative 
Vargas, would expand the definition of an ``accredited investor'' and 
allow Americans who can demonstrate education, professional experience, 
or other similar credentials the opportunity to invest in a private 
offer.
  It passed out of our Financial Services Committee 45-1, Mr. Speaker, 
demonstrating clear, bipartisan support. I agree with my friend from 
California. This bill is a step in the right direction, offering more 
Americans a chance to participate in the American Dream, build capital, 
help start a business, and use their God-given talent, skills, ability, 
and professional expertise to help that company be successful.
  Mr. Speaker, I urge a ``yes'' vote from all the Members on both sides 
of the aisle.
  Mr. SHERMAN. Mr. Speaker, I have no speakers on my side, and I yield 
myself the balance of my time.
  Mr. Speaker, I rise in support of Chairman Hill's bill, H.R. 3394. 
This bill will improve the definition of ``accredited investor.''
  Mr. Speaker, I urge a ``yes'' vote, and I yield back the balance of 
my time.
  Mrs. WAGNER. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida (Mr. Haridopolos).
  Mr. HARIDOPOLOS. Mr. Speaker, I will be brief with this explanation. 
I will first say that it is so nice to see our economy moving in the 
right direction. This bill will give more opportunities to Americans to 
invest with not as many regulations in their way. With these 
challenging times overseas, it is nice to see that we recognize that 
economic security equals national security, and by expanding the 
qualified investor rule, which will give exactly that: more opportunity 
to others.
  This bill, led by our chairman, expands access to private capital 
markets with those who have proven expertise. The bill allows investors 
to qualify based on licenses, education, and job experience, not just 
net worth.
  It truly modernizes our investor standards to reflect today's 
knowledge-based economy by widening their pool for investors who are 
qualified. It fuels private investment and business growth while at the 
same time keeping protections in place by the SEC and FINRA.
  For these reasons, I support the good bill by our chairman.
  Mrs. WAGNER. In closing, Mr. Speaker, the Fair Investment 
Opportunities for Professional Experts Act maintains investor 
protections while removing arbitrary barriers that have held back 
individual investors and early-stage entrepreneurs alike.
  Mr. Speaker, I urge my colleagues to support H.R. 3394, and I yield 
back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from Missouri (Mrs. Wagner) that the House suspend the 
rules and pass the bill, H.R. 3394, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mrs. WAGNER. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

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