107 Iowa L. Rev. 2311 (2022)

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Abstract

While investment opportunities in publicly offered and traded companies continue to present great access to the financial markets for a wide array of investors, private, exempt offerings increasingly play a greater role in the overall investing landscape. These private offerings, however, are typically only available to a select group of individuals and investment firms known as “accredited investors.” In August of 2020, the SEC adopted changes to the accredited investor definition in an attempt to modernize the definition and present occasion for greater capital formation. The basis for creating a distinction between accredited and unaccredited investors is rooted in a regulatory tradition that seeks to protect some investors from potentially dangerous investment vehicles, in the hope that such an oversight scheme can lead to more efficient and stable markets. In doing so, however, large portions of Americans are prevented from investing in a growing number of offerings that often represent dramatically positive asymmetric return opportunities. The newly revised definition indicates a positive step in the right direction but does not go far enough to achieve its goals, ultimately continuing to disallow many adequately sophisticated individual investors from a chance at participation in the exempt offering market. This Note offers several reasons the newly amended definition falls short and presents several additional means by which an individual investor can attain accredited status. This Note emphasizes that such changes would have the greatest impact in geographic areas with less available capital, particularly in product markets that are niche or growing. This Note closes by examining a burgeoning market, tokenized real estate, as a proxy for explaining some of the economic and financial benefits of an expanded “accredited” definition for both offerors and potential investors.