WASHINGTON D.C. — With hopes of expanding the pool of investors ready to raise capital for start-ups, Rep. Sarah McBride (D-Del.) and a coalition of representatives introduced a bill that would create an exam for accredited investors so they could do just that.
The Equal Opportunity for All Investors Act proposes a revision to the definition of an “accredited investor” under the Regulation D of the Securities Act of 1933 for those who could pass an exam created by the U.S. Securities and Exchange Commission. The exam would be designed with “an appropriate level of difficulty such that an individual with financial sophistication would be unlikely to fail.”
As it stands now, an accredited investor is a person or business that is permitted to buy and sell securities that are not registered with the U.S. SEC, like shares in a business that has not gone public yet. Generally, these investors also have privileged access to venture capital, hedge funds and angel investors.
Under the current regulators, accredited investors must earn $200,000 in an annual salary or $300,000 if married or hold more than $1 million in assets.
The Equal Opportunity for All Investors Act, if passed by Congress and signed by President Donald Trump, would eliminate that wealth requirement and instead require an accredited investor to rely on knowledge and expertise instead of wealth. The bill was sponsored by McBride and Reps. Mike Flood (R-Neb.), Mike Lawler (R-N.Y.), and Cleo Fields (D-La.).
McBride told the Delaware Business Times that the bill symbolizes a way to level the playing field for Black and Hispanic Delawareans that may be looking to become investors in their own communities.
“This is about fairness. It’s also about expanding opportunity for investors and unlocking capital for entrepreneurs who’ve been left out far too long,” McBride said. “It modernizes investor rules, and it’s a critical step in guaranteeing that not only people from historically disadvantaged communities are able to participate in the capital marketplace, but it also guarantees entrepreneurs from disadvantaged backgrounds are more able to access the investment from their own neighborhoods.”
Accredited investors are considered to have the higher level of financial sophistication than typical stockbrokers, as well as the ability to bear risk and the ability to invest in assets that cannot be easily converted to cash.
McBride said it was important to make sure the exam was rigorous to ensure people would not be using the status to invest in irresponsible ways, but it was also critical to open the doors for those who have little access to capital in the first place.
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2024 Goldman’s Sachs survey found that Black businesses face barriers to accessing capital and increasingly struggle to see loans approved. McBride herself heard from veterans and Delawareans of color starting businesses that struggle to finance it as they don’t have access to “old spaces of extreme wealth.”
“I had someone come into my [Washington D.C.] office talking about the challenge of a young Black man trying to find capital for his idea,” she said. “This bill is a tool to close the racial wealth gap and expand entrepreneurial opportunities.”
The Delaware Black Chamber of Commerce has endorsed the bill as a way to focus on talent, capability and potential of people rather than wealth.
“This legislation would open the door for more investors of color to participate in wealth-building opportunities and help close the capital gap for diverse business owners,” Delaware Black Chamber of Commerce President and CEO Ayanna Khan said in a prepared statement.
The Equal Opportunity for All Investors Act has been filed many times in the past, but many have stalled out. In 2023, the proposal died when it reached the Senate Committee on Banking, Housing, and Urban Affairs.
This year, the bill has been voted out of the House Committee on Financial Services and recommended to the full U.S. House of Representatives for consideration.
