The Equal Opportunity for All Investors Act of 2023

The landscape for private market investments is always evolving, and the Equal Opportunity for All Investors Act is now paving the way for more non-accredited investors to become eligible to invest in private real estate investments. 

The Act has made significant progress, passing the House of Representatives with overwhelming support.

We delve into the details of this Act, its implications, and the potential impact it may have for increasing access to private real estate for many investors.

Equal Opportunity for All Investors Act of 2023

What is an accredited investor anyway?

If you want access to opportunities such as unregulated investments not registered with the U.S. Securities and Exchange Commission (SEC), you'll need to become an accredited investor.

An accredited investor can be an individual who meets specific requirements or an entity such as a corporation or financial institution.

The definition first became prominent with the passage of Regulation D in 1982, which provides a number of exemptions from the registration requirements of the Securities Act.

To qualify as an accredited investor today, you must have one of the following:

  • Annual income of $200,000 or more ($300,000 if you’re married), or
  • Net worth of $1 million or more other than your primary residence, or
  • Professional designation such hold a Series 7, Series 65, or Series 82 license from FINRA (Financial Industry Regulatory Authority).
Learn More about becoming Accredited Investor Today➜

Currently, only 10% of US households are accredited

These households control 75% of the wealth.

Only 10% of US households are accredited. The Equal Opportunity for Investors act changes that.

How are the accredited investor rules changing?

The Equal Opportunity Act aims to update the accredited investor definition and provide an alternative pathway for non-accredited investors. 

The Act directs the SEC to establish an examination program within one year, administered by the Financial Industry Regulatory Authority (FINRA).

In late May, 2023, the House voted 383-18 to pass the Equal Opportunity for All Investors Act (H.R. 2797)

This bipartisan legislation, sponsored by Representative Mike Flood, a Nebraska Republican, expresses dissatisfaction with the SEC's current wealth and income focused-test for determining who can participate in less-regulated private securities offerings.

Rep. Flood introduced the Act in May 2023

Representative Flood introduced the Equal Opportunity for All Investors Act of 2023 in May 2023.

He outlined that the bill aims to expand the accredited investor definition to include individuals certified through an SEC-written exam administered by FINRA.Rep.

Flood argues that wealth should not be the sole determinant of investment know-how and proposes a pathway for knowledgeable investors to participate in private markets.

The bill directs the SEC to create a thorough accredited investor exam that includes parameters to ensure understanding of the differences and risks between private and public offerings.

Rep. Flood highlights the bipartisan nature of the bill and urges his colleagues to support it.

Explore the bill from Congress ➜

Examination Details

The examination program outlined in the Act is designed to ensure that individuals seeking accreditation demonstrate financial sophistication and competence in various aspects of investing.

It is expected to cover many aspects of unregistered securities including:

  • Different types of securities
  • Private and public company disclosure requirements
  • Corporate governance
  • Financial statements
  • Potential conflicts and risks

The Act should open up opportunities for knowledgeable investors who may not come from substantial financial means.

This represents a significant milestone in the investment industry, particularly for the realm of alternative investments outside of the stock market.

Path to Becoming Law

The test is expected to be available sometime in mid to late 2024.

The Equal Opportunity for All Investors Act has already taken a significant step by passing the House of Representatives with an overwhelming vote of support (383-18). 

The next stage in the legislative process involves the Act being reviewed and voted upon in the Senate. If it passes the Senate, it will proceed to the final step of being signed into law by the President.

Given the pace that it is moving already, this could be in the coming months. 

While exact timelines are uncertain, given the substantial bipartisan backing behind this Act, it is expected to progress through the legislative process with relative speed.

Assuming the one-year window is provided and achieved, means the text would be available sometime in mid to late 2024.

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