New SEC Rules, Accredited Investors Get Your Coins Ready

CBx Vibe:Rules” 6LACK

By CultureBanx Team

  • The SEC has expanded its definition of who qualifies as an “Accredited Investor”
  • African-American and Latinx wealth levels are just 8% and 12% respectively of non-minority wealth levels

Get ready folks to invest in companies before they go public now that the Securities and Exchange Commission (SEC) has expanded its definition of who qualifies as an “Accredited Investor”, individuals who are worth $1 million, or earn $200,000 a year. The amendments will allow more investors to participate based on their knowledge and expertise. Minorities will especially benefit from the opportunity to invest in private offerings, because it goes without saying that many people worth less than $1 million are capable of sound investing. Are you financially sophisticated enough to pass the test?

Why This Matters: Since African-American and Latinx wealth levels are just 8% and 12% respectively of non-minority wealth levels, they’ve been kept away from getting in on the next big company before it goes public. Under existing SEC rules, certain sophisticated investors, such as accredited investors, may participate in investment opportunities that are not generally available to the public and that are regarded as involving more risk. In today’s market, those rewards are increasingly monopolized by private investors. Not to mention that the accredited investor definition largely has been unchanged since 1982.

Minorities will especially benefit from the opportunity to invest in private offerings, because it goes without saying that many people worth less than $1M are capable of sound investing

It’s definitely time to get in on these unicorns early because private companies are taking longer to hit the public markets. In 1999, the average age of a tech company at the time of IPO was 4 years, by 2014, it’s 11 years. For example, Amazon IPO’d three years after its founding at a $430 million valuation, and it took Uber 10 years to go public at a $70 billion valuation. Just think about the amount of money you could’ve made by investing in these companies early.

Situational Awareness: The dollar limits for Accredited Investors have always been a clear measurable standard. Now, the SEC is opening the door to making sophistication alone a door to being able to invest in private offerings. However, sophistication is a fairly vague concept.  

CBx Vibe:Rules” 6LACK

CONTRIBUTOR

CultureBanx Team

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