by David R. Burton
The Heritage Foundation
February 05, 2014
Backgrounder
The Securities and Exchange Commission (SEC) is considering a regulatory change—increasing the “accredited investor” income and net worth thresholds in Regulation D—that would reduce the pool of potential investors in small businesses and start-up companies by 60 to 70 percent. This would have a devastating impact on the ability of entrepreneurs to launch new enterprises and impede small firms’ capacity to grow. Given that Regulation D accounts for about $900 billion in new investment each year, two-thirds of which is equity investment, this change would have a macroeconomically important negative impact. The correct approach is to determine whether evidence indicates that the current thresholds are problematic, and the answer to that is no. Given the lack of evidence of a problem and the large adverse economic impact of the proposed increases, the SEC should not adopt this policy, and Congress should prevent the SEC from doing so.



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