The rise of private markets, combined with the outdated Accredited Investor definition under Regulation D of the Securities Act of 1933, will contribute to and exacerbate existing economic inequality in America if not addressed.
Under the Securities Act of 1933, when a company goes public, there are vast disclosure requirements.[1] These disclosure requirements help ensure investors are well informed about the risk of investing by providing information about threats to a company’s health.[2]
The goal for many closely held companies has been to go public, which allows companies to raise a substantial amount of capital by making public offerings of their securities.[3] Companies are often willing to adhere to the complex, expensive, and onerous disclosure requirements the Securities Exchange Commission (“SEC”) requires to make an initial public offering (“IPO”) because of the resulting access to capital.[4] However, in recent years, a growing number of companies have not wanted, nor needed, to go public, because they are able to access sufficient capital in private markets instead, which are not bound by the same disclosure requirements.[5] As of August 2025, the number of publicly traded companies in the United States has dropped by around fifty percent since the 1990s.[6] There were around 4,000 publicly traded companies in August of 2025, compared to over 8,000 publicly traded companies in the 1990s.[7] As the public market is shrinking, the private market is expanding.[8]
However, only select investors have the opportunity to invest in this growing private market. Under Regulation D of the Securities Act of 1933, “Accredited Investors,” defined as individuals who have (1) an individual income of over $200,000 in each of the last two years, (2) a joint income of over $300,000 with the individual’s spouse, or (3) a net worth over $1,000,000 (excluding one’s primary residence), can access the private market.[9]
Most Americans do not meet this wealth threshold. In 2024, only sixteen percent of American households had an income of $200,000 or more, and the median household income was $83,730.[10] Accredited Investors, who are already wealthy individuals, have access to this booming private market, while individuals who fail to meet this wealth threshold, are cut off from this wealth-maximizing opportunity.
In order to address this issue, a bipartisan bill, the Equal Opportunity for All Investors Act of 2025 (“H.R. 3339”), has been passed by the House and awaits consideration by the Senate Committee on Banking, Housing, and Urban Affairs.[11] H.R. 3339 seeks to broaden the definition of an “Accredited Investor” under Regulation D to include individuals who can demonstrate their understanding of the private market and its inherent risks, through a uniform exam.[12]
H.R. 3339 is a commemorable bipartisan effort to ensure that Americans are not being unfairly and illogically cut off from economic wealth-maximizing opportunities. Now, more than ever, when private markets are growing and public markets are shrinking, the outdated Accredited Investor definition should be modernized to no longer rely solely on an arbitrary wealth threshold to determine who can participate in private investments.
The SEC amended the Accredited Investor definition in 2020 to include holders of the Series 7, Series 65, and Series 82 licenses.[13] However, these licenses are professional licenses designed for individuals who work in the securities industry.[14] The Series 7 and Series 82 exams require sponsorship by a FINRA member firm or other applicable self-regulatory organization, and the Series 65 exam requires state registration as an investment advisor.[15]A uniform exam would not be limited to professionals in the securities industry, thus expanding access.
However, it is imperative that the uniform exam, which Congress would delegate to the SEC to develop, is rigorous enough to ensure that the risk of private markets is fully understood. According to H.R. 3339, the SEC would be tasked with crafting an examination that is designed “with an appropriate difficulty level such that an individual with financial sophistication or training would be unlikely to fail.”[16] Additionally, the examination is to include ways to demonstrate competency in areas like disclosure requirements of different securities.[17] The exam is to be administered by a registered national securities association, and offered free of charge to the public.[18]
It cannot be over-emphasized that the private market is a risky place.[19]As companies shift to private markets, growing portions of the United States economy are “going dark,” because they are not bound by the same disclosure requirements as public companies.[20] It is vital that the uniform exam be reasonably demanding, to ensure that individuals are not susceptible to making uninformed investments, while being unaware of the risk associated with their actions.
Some may argue that the current Accredited Investor definition is sensible because wealthier individuals are better able to bear the risks of engaging in private markets, as they have more money to lose. However, that argument is paternalistic, and ignores any sense of financial freedom.[21] It is an individual’s choice what to do with their own earned money. In the same way that the American government doesn’t prohibit citizens from spending money on lottery tickets, it shouldn’t prohibit individuals from investing in private markets, when they comprehend the risks involved.[22]
While the current Accredited Investor definition is faulty because of its association between wealth and sophistication, the purpose of it remains admirable: individuals engaging in risky financial activity should understand they are engaging in risky activity. By modernizing the Accredited Investor definition to require a threshold of knowledge, instead of just wealth, the same goal is achieved, while avoiding exacerbating economic inequality in America.
[1] 15 U.S.C § 77(e)-(g).
[2] Eva Su, Cong. Rsch. Serv., IF11256, SEC Securities Disclosure: Background and Policy Issues (2024), https://www.congress.gov/crs-product/IF11256.
[3] Eva Su, Cong. Rsch. Serv., R45221, Capital Markets: Public and Private Securities Offerings (2024), https://www.congress.gov/crs-product/R45221.
[4] Jay R. Ritter, Initial Public Offerings: Updated Statistics 28–29 (2025), https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf (noting that over 280 United States Initial Public Offerings (excluding American Depositary Receipt) with an offer price of $5.00 or greater doubled in price on the first day of trading, from 1997-2025).
[5] Kairong Xiao et al., Fewer Companies are Going Public. Are Regulations Driving the Drop?, Colum. Bus. Sch. (Aug. 13, 2025), https://business.columbia.edu/research-brief/regulations-costs-public-companies-ipo-decline; Allison Herren Lee, Going Dark: The Growth of Private Markets and the Impact on Investors and the Economy, U.S. Sec. and Exch. Comm’n (Oct. 12, 2021), https://www.sec.gov/newsroom/speeches-statements/lee-sec-speaks-2021-10-12.
[6] Kairong Xiao et al., supra note 5.
[7] Id.
[8] Lee, supra note 5.
[9] 17 C.F.R. §§ 230.500–230.508 (2025) (noting that for income requirements for “Accredited Investors” there must be a reasonable expectation of reaching the same minimum income level in the current year).
[10] Melissa Kollar & Zach Scherer, Income in the United States: 2024, U.S. Census Bureau (Sep. 2025), https://www2.census.gov/library/publications/2025/demo/p60-286.pdf.
[11] H.R. 339, 119th Cong. (2025) (as received in the Senate July 22, 2025).
[12] Id.
[13] SEC Modernizes the Accredited Investor Definition, U.S. Sec. and Exch. Comm’n (Aug. 26, 2020), https://www.sec.gov/newsroom/press-releases/2020-191 (stating holders of the Series 7, Series 65, and Series 82 licenses must be in good standing).
[14] Qualification Exams, FINRA, https://www.finra.org/registration-exams-ce/qualification-exams (last visited Oct. 26, 2025).
[15] Series 7– General Securities Representative Exam, FINRA, https://www.finra.org/registration-exams-ce/qualification-exams/series7 (last visited Oct. 26, 2025); Series 82– Private Securities Offerings Representative Exam, FINRA, https://www.finra.org/registration-exams-ce/qualification-exams/series82 (last visited Oct. 26, 2025); Amendments to Accredited Investor Definition, U.S. Sec. and Exch. Comm’n, https://www.sec.gov/resources-small-businesses/small-business-compliance-guides/amendments-accredited-investor-definition (last visited Oct. 26, 2025).
[16] H.R. 339, 119th Cong. (2025).
[17] Id.
[18] Id.
[19] See Rob Copeland, Billions of Dollars ‘Vanished’: Low-Profile Bankruptcy Rings Alarms on Wall Street, N.Y. Times (Oct. 13, 2025), https://www.nytimes.com/2025/10/10/business/first-brands-bankruptcy-wall-street.html (noting a pertinent example of this risk has been recently highlighted by First Brands’ collapse, leaving investors and creditors grappling with billions in losses).
[20] Lee, supra note 5.
[21] Nick Morgan, Paternalism Reigns in an SEC ‘Investor’ Rule, Wall St. J. (Apr. 2, 2025, at 3:15 ET), https://www.wsj.com/opinion/paternalism-reigns-in-an-sec-investor-rule-ipo-7c94fd08?gaa_at=eafs.
[22] Id.