Breaking The Wealth Barrier: Why The SEC Should Redefine ‘Accredited Investor’
By Aron Solomon
The U.S. Securities and Exchange Commission’s outdated accredited investor rules have locked millions of capable Americans out of one of the most dynamic sectors of the economy: private company investments.
With ICAN, or the Investor Choice Advocates Network, filing a writ of mandamus to compel the SEC to revisit its archaic standards, there’s finally a chance for meaningful change. This isn’t just about updating regulations — it’s about fairness, innovation and common sense.
Currently, the SEC defines accredited investors by rigid wealth and income thresholds: a net worth of more than $1 million (excluding your home) or an annual income of $200,000 ($300,000 with a spouse) for the past two years.
These rules were designed to protect inexperienced investors from risky bets, but in practice, they’ve excluded millions of knowledgeable Americans from opportunities to build wealth and fuel innovation.
Think about it: Under these rules, someone who inherits a fortune can invest freely, while a teacher managing a million-dollar school budget is shut out. The assumption that wealth equates to financial sophistication is both outdated and absurd.
This exclusionary framework doesn’t just harm individuals — it also stifles economic growth.
Funding where it’s needed
Startups and small businesses, the engines of job creation and innovation, rely on access to capital. Yet, the current rules deny a massive pool of potential investors the chance to support these ventures. Venture capital and institutional investors alone can’t meet the needs of every promising startup. Allowing more Americans to participate in private markets would inject vital funding into businesses that drive our economy forward.
The harm is even more pronounced for underrepresented groups. Women, minorities and individuals from lower-income backgrounds are far less likely to meet the SEC’s wealth thresholds — even when they have the financial acumen to make informed decisions. This perpetuates a cycle of inequality, concentrating wealth-building opportunities in the hands of a privileged few.
ICAN’s writ of mandamus is a bold and necessary move. The SEC is legally required under the Dodd-Frank Act to review the accredited investor rules every four years, but it has failed to act on ICAN’s petition for reform for more than two years. This inaction underscores the urgency of modernizing these rules.
The solution is straightforward: Financial sophistication should be measured by what people know, not just what they own. Recognizing advanced business degrees, certifications like the CFA or CFP, and practical experience such as running a successful business would open private markets to capable investors without compromising protection.
Other countries are already leading the way. In the U.K., investors can self-certify their financial expertise, while Australia allows certification through qualified accountants. These models show that it’s possible to protect investors while broadening access.
Critics argue that loosening the rules could expose inexperienced investors to undue risk. While this is a valid concern, it doesn’t justify maintaining a system that equates wealth with wisdom. Instead, investor protections should focus on enhanced disclosures, clear risk warnings and educational tools — many of which are already standard on modern investment platforms.
Here’s the truth: The current system doesn’t eliminate risk — it just shifts it.
Wealthy investors aren’t inherently better at making decisions; they’re simply deemed rich enough to absorb losses. Meanwhile, capable individuals with the skills and knowledge to succeed are locked out of opportunities that could transform their financial futures.
More than money
Reforming these rules isn’t just about fairness — it’s about unlocking the full potential of our economy. Imagine millions of financially savvy Americans investing in the next wave of groundbreaking startups. These investors would bring more than money; they’d contribute fresh ideas, valuable networks and hands-on support to help businesses thrive. The ripple effects would reach far beyond investors and entrepreneurs, strengthening industries, creating jobs and boosting local economies nationwide.
The SEC’s inaction isn’t just bureaucratic negligence. It’s a missed opportunity to modernize our financial system and drive inclusive economic growth. Every day under the current rules is another day that startups struggle for funding, capable investors are sidelined, and our economy misses out on the benefits of broader participation. ICAN’s legal challenge is more than a call for accountability; it’s a rallying cry to reimagine a system that works for everyone.
Policymakers, business leaders and the public must rally behind this cause. The accredited investor rules are relics of a bygone era, designed for a world that no longer exists. Reforming these outdated regulations isn’t just overdue — it’s essential. By creating a smarter, more inclusive framework, we can protect investors while empowering more Americans to contribute to the economic engine of private markets.
It’s time to build a future that’s fairer, stronger and more innovative for all.
Aron Solomon is the chief strategy officer for Amplify. He holds a law degree and has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. His writing has been featured in Newsweek, The Hill, Fast Company, Fortune, Forbes, CBS News, CNBC, USA Today and many other publications.
Illustration: Dom Guzman
