The SEC announces amendment to the Securities Law w.r.t. to the definition of “accredited and institutional investor.” The U.S. Governmental agency is looking to recognize the knowledge and expertise of individuals to freely participate in the financial markets.
The new definition seeks to provide favourable treatment for “qualified and knowledgable” individuals in addition to the lower limit on turnover. Up until now, the limit for accredited investors was a net worth of $1 million (excluding personal residence) or an income of at least $200,000 in the last two years.
The amendment allows for greater inclusion of crypto in the 401(k) of an individual along with providing diversification of one’s portfolio.
This is a significant move for Bitcoin and crypto enthusiasts as much of the regulated space like Grayscale Trust Funds, Bakkt and so on are limited to accredited and institutional investors. The new law introduces changes to the sections Rule 501(a), Rule 215, and Rule 144A of the Securities Act. SEC Chairman, Jay Clayton notes in the press release,
“For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth, but also based on established, clear measures of financial sophistication. I am also pleased that we have expanded and updated the list of entities, including tribal governments and other organizations, that may qualify to participate in certain private offerings.”
The accreditation will be granted to individuals who clear financial exams pertaining to Series 7, Series 82 and Series 65. The commission is also allowing entities with foreign roots to acclaim the accreditation by amending Rule 2a51-1(b) under the Investment Company Act.
The investment proposition for LLPs has also improved in the process. Now, “limited liability companies with $5 million in assets may be accredited investors and add SEC- and state-registered investment advisers, exempt reporting advisers.”
Crypto Driving FinTech Revolution
With the new criteria, the easing will foresee greater adoption of regulated crypto products. According to the co-founder of data analytics firm, Coinmetrics, Jacob Franek,
Have to imagine that crypto was an accelerant to this.
The above argument has a lot of strength to it given the ability of the crypto market to operate outside the SEC’s purview. The recent DeFi bull market despite the safe-guards against ICO is definitive proof of that. Moreover, the first step towards the amendment of the definition was taken in December 2015.
The new rule will be enacted in the next 60 days (from today).
How do you think companies and individuals will reach to the changes? Please share your views with us.