By Dana Sanchez
The Securities and Exchange Commission today amended its definition of an “accredited investor” — one of the principal tests for determining who is eligible to participate in U.S. private capital markets.
Until now, investors were deemed accredited by the SEC if they had a net worth of more than $1 million, annual income of more than $200,000 or they met certain legal requirements. This opened the door to access to private financial markets that the broader public was excluded from.
For the first time, individuals will be able 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,” SEC Chairman Jay Clayton said in a press release.
Most African Americans have historically been excluded from accreditation. In the footnotes of his public statement, Clayton included the following: “African-American wealth levels are just 8 percent of non-minority wealth levels.”