The U.S. Securities and Exchange Commission (SEC) is considering a new rule that could allow retail investors to access private markets by passing an accredited investor exam. Currently, only individuals with a net worth of at least $1 million or an annual income of $200,000 can invest in most startups and private funds before they go public. The proposed exam, developed by the Financial Industry Regulatory Authority (FINRA), would be open to anyone aged 18 or older and would consist of approximately 75 multiple-choice questions. The test would focus heavily on investment risks, financial statements, conflicts of interest, and corporate governance, with a fee likely set at $100.
The SEC is also seeking feedback on whether certified professionals such as CPAs, CFA charter-holders, and CFP professionals should automatically qualify as accredited investors. Brian Armstrong, CEO of Coinbase, praised the proposal, calling it a significant step forward for investors who have been priced out of private deals. However, critics like SEC Commissioner Hester Peirce and Noah Damsky from Marina Wealth Advisors argue that the exam still imposes government oversight and may not be suitable for ordinary investors.
The timing of the proposal has drawn scrutiny, as private capital fundraising is on track to decline for the fifth consecutive year. Better Markets, a financial reform group, suggests the SEC’s plan is a response to institutional investors pulling back from private markets. The public has until December 4 to submit comments on the proposal, which is part of a broader effort by SEC Chair Paul Atkins to open private markets to retail savers.