Here are five reasons why it’s time to modernize the Accredited Investor Rule—and why it should matter to every American.
By Mark Hiraide, Senior Legal Director & Policy Counsel at Investor Choice Advocates Network (ICAN), and a corporate/securities law partner with Mitchell Silberberg & Knupp LLP.
Imagine being trusted to manage a $1 million budget in your career, but legally barred from investing $5,000 in a startup.
That’s not a hypothetical. It’s the reality for millions of Americans under an outdated SEC rule that restricts access to private investments based on arbitrary income and wealth thresholds. A teacher, nurse, or veteran with financial acumen is locked out; meanwhile, a wealthy individual with no experience is automatically let in.
This isn’t just unfair—it’s a systemic barrier to wealth-building, innovation, and economic mobility.
Here are five reasons why it’s time to modernize the Accredited Investor Rule—and why it should matter to every American.
1. It Excludes Most Americans Based on an Arbitrary Definition
The current rule says you’re “accredited” if you earn over $200,000 a year (or $300,000 with a spouse), or have a net worth above $1 million—excluding your home. There’s no credit given for financial education, investment experience, or professional expertise.
This means most Americans—about 80% or more—are effectively barred from investing in the very private markets where the greatest growth now happens. Not because they aren’t capable, but because they aren’t wealthy enough.
2. It Creates a Two-Tier Financial System
The number of publicly traded companies has dropped by almost 50% in the last few decades, concentrating opportunities in a limited pool of stocks and related investment vehicles. This trend isn’t coincidental. Many companies now remain private for a decade or more, supported by abundant private capital and wary of regulatory overhead.
That means the wealth creation that used to occur post-IPO now largely happens in the private markets, where only accredited investors are allowed to participate. By the time companies go public, much of the explosive growth is already over.
For everyday investors, this trend doesn’t just limit opportunity—it undermines one of the core promises of American capitalism. The result is a system that reinforces inequality and concentrates opportunity at the top.
3. It Jeopardizes Long-Term Retirement Planning
For decades, financial advisors have relied on the “4% rule”: the concept that retirees can safely withdraw 4% of their savings annually without depleting their funds. However, that assumption was based on a market landscape that has transformed dramatically.
Today’s savers face lower yields, fewer public companies, and restricted access to higher-growth private investments. With the average investor boxed out of the private market, even diligent financial planning may not be enough to secure a stable retirement, particularly for younger generations.
4. It Blocks Local Investment and Grassroots Entrepreneurship
The Accredited Investor Rule doesn’t just limit individuals—it restricts the flow of capital to small businesses and early-stage ventures.
Entrepreneurs—particularly those outside major financial hubs—want to raise money from the people who are most vested in their success; family, friends, and community members. But under the current rule, most of those supporters are legally forbidden from investing.
Meanwhile, startups with access to institutional venture capital face fewer hurdles. The result is a two-tiered investment ecosystem—not based on merit, but on regulatory exclusion.
This isn’t protecting investors. It’s stifling innovation and concentrating opportunity in a narrow segment of the economy.
5. It’s Anti-American in Spirit
Our economy thrives on the principle that opportunity is available to anyone willing to take a chance, work hard, and make informed decisions.
ICAN believes investor access should be based on capability, not capital. We’ve called on the SEC to modernize the definition of an Accredited Investor to include those with relevant education, experience, or licensing. And when the SEC failed to act, we filed suit to compel them to respond.
Americans are capable of making informed financial decisions—especially when given clear disclosures and appropriate tools. It’s time for regulation to reflect that.
ICAN is actively challenging the SEC on this issue- more about our work on this topic here: https://www.icanlaw.org/ican-v-sec-accredited-investor-rule-reform.
Author Bio: Mark Hiraide is Senior Legal Director and Policy Counsel at the Investor Choice Advocates Network, a nonprofit public interest law firm serving as a voice for smaller investors and entrepreneurs. ICAN’s full analysis of the Clarity Act is available at icanlaw.org.
