The Ban Has Lifted: Now Is the Time to Change the Accredited-Investor Standard

Lifting the ban on general advertising and general solicitation will ultimately change how emerging companies receive funding. With greater access to previously untapped investors, more new businesses will be able to get on their feet and be successful. This success depends on the regulation of these offerings to ensure they are free of fraud and that investors maintain confidence in the market. As the standard currently stands, it is likely that the removal of the ban will result in a regulatory gap, which may take advantage of several investors.

The accredited investor standard should be changed to reflect not only individual wealth, but also financial sophistication. It should require disclosure of the risks up front and a diversification requirement. This will ensure a “meeting of the minds” between the issuer and the investor and produce a more stable market for privateplacement offerings.