Industry still wait-and-see on SEC's proposal to expand "qualified investor" scope

The US Securities and Exchange Commission (SEC) issued a proposal two weeks ago to expand the scope of becoming a qualified investor, but industry insiders are cautiously optimistic.

According to information from the SEC, qualified investors are defined as individuals with net assets of more than $ 1 million (or annual income of more than $ 200,000), organizations with more than $ 5 million in assets, banks and institutions that meet certain legal definitions, and other Entities of certain terms. Becoming a qualified investor gives entities and individuals more opportunities for private investment, including higher-risk investments and hedge funds.

In the new amendment, "knowledge employees" in certain private funds, companies that meet certain restrictions, entities with investments that comply with investment company law, home offices with more than $ 5 million in assets, and eligible for financing spouse.

SEC Chairman Jay Clayton said in a statement, "The modernization of this approach should long be realized. The proposal will provide individuals with more means to qualify them to participate in our private capital markets based on established and clear financial instruments. "

Although this is the first time the SEC has lowered the threshold for investing in private securities in the past 40 years, the industry is not too optimistic about this proposal.

Kelman law firm partner Zachary Kelman told Coindesk that "so far, the expansion of recognized investor status appears to apply primarily to insiders on Wall Street, such as licensed brokers or 'knowledge employees' of private investment funds, which It's not as extensive as people think. "Drew Hinkes, general counsel for Athena Blockchain, told Coindesk that although the proposals look promising," the details are the devil. "

The proposal contains a basic framework, including qualifications for academic institutions and examinations by industry self-regulatory organizations. Hinkes believes this "could have a huge impact." Under the proposal, the SEC must specify specific certificates that qualify investors. But Hinkes believes that the specific certificates are currently unknown, so more inferences cannot be made.

The proposal also stated, "We are careful that an overly broad definition may affect important investor protection and reduce public confidence in this important market. At the same time, unnecessary narrow definitions may restrict investors Opportunities for investment opportunities, as certain factors may provide investors with adequate protection, such as the investor's financial position, net worth, financial knowledge and experience, and the amount of assets managed. "

SEC Commissioner Hester Peirce said investors should use their maturity, that is, their knowledge of the markets they invest in, to determine their certification status. In a statement, she said, "Our current definition includes those who live on a Ferrari that their dad bought, not including those who spend weeks making money and spend a long time on the weekend. Investors who find the best way to invest. "

Allison Lee, a member who opposed the proposal, said the proposal could pose "serious risks" to individual investors such as seniors and retirees.

Either way, Kelman believes that the proposal "represents a step in the right direction" but views it as an issue of accessibility rather than a systemic risk, ignoring the origin of the concept of "qualified investor". After the Great Depression. He believes that "the transition from the premise of qualifying investor status to an 'investor IQ test' raises the question of why investors fundamentally need SEC protection."

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Author Xiu MU

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