The US Securities and Exchange Commission has made changes to defining who qualifies as an “approved investor”, which could broaden the scope for participation in future private equity offerings. According to the committee, this development is the result of many years of internal discussions about how best to balance the requirements for investor protection and the need to make the US investment landscape more inclusive.
Given the SEC’s insistence on regulated cryptocurrency token sales, the news could have serious implications for future security token offerings and even expand the group for those with access to regulated cryptocurrency token sales.
SEC expands the definition
Under the Securities and Exchange Commission, which is working to change the definition of an approved investor, the committee will not treat assets as the only basis for determining whether an individual or company qualifies to participate in the sale of private equity. A pre-approved SEC investor model requires a minimum of $ 1 million in net worth or annual income of at least $ 200,000. The new definition includes looking at “financial complexity” to determine whether individuals or institutions are eligible investors.
According to the SEC, financial expertise includes criteria such as professional knowledge, certifications, and market experience. Commenting on the move, SEC Chairman Jay Clayton said the revised definition broadens the pool of eligible investors to include organizations such as tribal organizations. Other highlights include the spouse equalization requirement, which allows spouses to pool their finances and work as a single approved investor.
In response to this news, several cryptocurrency stakeholders commented that the previous definition of a certified investor was incorrectly equating wealth with an investment practice. Tyler Winklevos, Co-Founder and Trustee of Gemini Cryptocurrency Exchange, highlighted the fact that many on Wall Street have been slow in setting the Bitcoin Value Proposition (BTC).
With wealth and annual income now the only eligibility criterion for private equity rounds, some critics have argued that the previously approved investor model was exceptional. As a result, capital formation centered around the privileged few. For Christian Camera, managing partner of the blockchain venture capital fund Sustany Capital, the redefinition is a step in the right direction. He told Cointelegraph:
“The Securities and Exchange Commission must balance investor protection powers; maintain fair, orderly and efficient markets; and promote capital accumulation.“ Forced regulation ”has been shown to introduce a state of uncertainty that discourages capital accumulation without providing additional protection to the investor. An efficacy for aligning these goals is to educate market participants. This education can be organized so that citizens interested in direct investment can take online examinations conducted by the Securities and Exchange Commission or business schools. ”
The Webcam idea for online testing raises another topic that arises from the SEC’s choice of the word “economic development.” Since the details of the change are still unclear, the new commission definition for the Certified Investor may include training courses or exams designed to test knowledge of financial investing.
Alon Goren, co-founder of blockchain incubator Draper Goren Holm, acknowledged that the rule changes indicate the potential for more comprehensive investment guidelines. However, he said the rules still prevent large numbers of people from accessing real estate based solely on their financial situation, and told Cointelegraph:
In my opinion, the previous rules used to mean, “If you are bad, you are not smart enough to participate,” but the new rules now mean, “If you are bad, you are probably not smart enough to participate.” … “This is not fair, it is not fair, and this is not the soul of this country.”
Are you looking to sell cryptocurrencies?
With the cryptocurrency causing a highly regulated state in the United States, the new change in the SEC could have serious implications for cryptocurrency companies and investors. Given the Commission’s position that first currency offerings are often an illegal sale of securities, the country’s cryptocurrency collection market is highly regulated.
By broadening the definition of eligible investors, the security token offering can be open to a wider group of individual and institutional buyers. The concept of financial development can take a deeper place in the cryptocurrency investment market.