The SEC spent last Wednesday considering a new way into private markets. Meanwhile, its lawyers are in two federal courts defending the barrier that keeps most people out.
By Nick Morgan, Founder and President, ICAN Law
Last week, the Securities and Exchange Commission asked whether certain professional credentials should be enough to qualify someone as an accredited investor, in addition to the limited ones already designated. In a federal court in Texas, it argued that qualifying under the rule as written is so easy that our client must have already done it. In a federal court in New York, it argued that qualifying is so demanding that a law firm came up short after detailed documentation.
Same rule. Same month. Same agency.
Here is what each one looked like.
Washington: the agency moves toward what Congress asked for 46 years ago
On September 30th, the Commission voted to propose a set of amendments it describes as expanding retail access to private markets. Separately, it asked for public comment on six new pathways to qualify as an accredited investor based on knowledge rather than wealth: five professional credentials, including the CPA, CFA, and CFP, plus an accredited investor exam that FINRA would develop.
We have argued for precisely this for years. A knowledge-based test is what the statute contemplated in the first place: when Congress added the term “accredited investor” to the Securities Act in 1980, it told the Commission to qualify people on the basis of factors including financial sophistication, knowledge and experience in financial matters, net worth, and assets under management. The Commission kept the one about what a person owns and added an income test Congress never mentioned. For four decades, the Commission kept the rule tied almost entirely to wealth. When it finally added a knowledge path in 2020, it limited it to three FINRA licenses few people outside the industry hold. In a December 2023 report, the Staff listed our own rulemaking petition among the reform proposals it had received.
So this is a real step, and worth saying so plainly. Once you accept that a credential or an exam can establish that a person is qualified to invest, you have accepted that income and net worth were never measuring what the agency said they were measuring.
Two things it is not, though. It is not final. The credential pathways come as notices under the 2020 rule that lets the Commission add qualifying credentials by order rather than through a full rulemaking. Comments run 60 days after Federal Register publication, and nothing takes effect until the Commission issues an order designating a credential. It has not committed to designating any of them. And it does not touch the income and net worth thresholds, which stay exactly where they are.
Which brings us to the two courtrooms.
Texas: a screenshot was enough
ICAN Law asked the court to reconsider its dismissal of Kapszukiewicz & Healthcare Shares, P.B.C. v. SEC, a challenge to the wealth and income thresholds brought on behalf of Emily Kapszukiewicz and Healthcare Shares, P.B.C.
Ms. Kapszukiewicz fell just short of the thresholds—roughly $195,000 in income against a $200,000 requirement, and roughly $850,000 in net worth against $1 million. Two verification services she used each confirmed she did not qualify, and a small healthcare fund turned her away twice, in March and April 2025.
Rather than defend the thresholds as applied to her, the Commission argued she “appears” to qualify through a separate provision, pointing to her role as an advisor to the fund and citing a screenshot of her LinkedIn profile. Reaching that conclusion requires moving from the Securities Act into the Investment Company Act, applying a 1997 SEC rule, following four layers of cross-reference, and reconciling the result against a 2014 staff no-action letter. Under that letter, the determination is not the investor’s to make. It belongs to the fund manager, and the fund bears the risk when a purchaser turns out not to qualify.
The court adopted that theory and dismissed the case without reaching Ms. Kapszukiewicz’s constitutional claims.
Even on the Commission’s own terms, the path it describes is narrow and unattainable for most. At best, it would let Ms. Kapszukiewicz invest in the single fund she advises. It does nothing about any other private offering, and it leaves the arbitrary wealth thresholds untouched for every investor who has no such association to point to.
New York: 72,000 pages were not enough
In New York, a firm carried that risk and did extensive vetting, but it didn’t matter. Mona Shah’s law firm has experienced a years-long ordeal with the SEC after thoroughly documenting its investors’ eligibility, only for the SEC to sue without doing the review the rules require.
ICAN Law served a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure against the Commission in SEC v. Ahmed, on behalf of immigration attorney Ms. Shah and her firm. Rule 11 requires every plaintiff, the government included, to investigate before signing a complaint.
The Commission sued Ms. Shah in November 2023 on a charge of selling unregistered securities, resting on an allegation that investors in three EB-5 offerings were not accredited.
The firm’s process was built to answer that question. Every prospective investor sat for two consultations with an immigration attorney. The firm reviewed tax returns, bank statements, and property records, prepared a source-of-funds memorandum tracing every dollar of the $500,000 minimum, and obtained independent confirmation of accreditation from the escrow bank before any money moved. When it could not satisfy itself that someone qualified, it turned the investor away.
Four months before filing, Commission staff questioned Ms. Shah under oath, and she told them the investor files existed and where they were kept. The staff never looked at them and interviewed no one else at the firm, though the offering documents name the firm as special counsel and say its securities-qualified attorneys prepared them. Three days after the deposition, the Commission subpoenaed the firm’s written policies and the checklist it sent to investors—but not the files that would have answered its own allegation. It sued anyway.
In January 2026, Ms. Shah produced more than 72,000 pages of those records. After nine months of responding that it lacked sufficient information to say whether the investors qualified, we served our motion. The rules gave the Commission three weeks to fix the problem first. Six days before that window closed, it withdrew those answers and replaced them with flat denials. After nine months of saying it could not tell either way, it now says they were not, explaining that the evidence it held all along was enough to know. If that is true, the SEC could have said so in its December 2025 responses.
Documents handed over two years into a lawsuit are not an investigation. They are the investigation the Commission should have done before it ever walked into court—and this is why Rule 11 exists.
No fraud and no investor harm has been alleged against Ms. Shah or her firm. Nearly three years in, Ms. Shah has spent a significant amount of time and money defending a charge the Commission brought without ever reading the records that answered it—records her firm built and kept for exactly that purpose.
Ms. Shah walks through the case in Episode 104 of our podcast, SEC Roundup: Fix the Gate, Don’t Shoot the Gatekeeper, which is available here.
One rule, read three ways
An agency cannot ask whether to widen access in the morning and then litigate two different ways against it in the afternoon.
The SEC has three jobs: protect investors, keep markets fair, and help capital formation. They don’t compete. Real investor protection goes after fraud and bad actors, not ordinary market risk. A wealth gate doesn’t stop fraud; it just decides who gets to take a risk. Ms. Kapszukiewicz was turned away for being $5,000 short. Ms. Shah’s firm did the vetting and was sued anyway. Neither outcome protected anyone. Clear rules, honest disclosure, and the freedom to invest your own money serve all three mandates at once. Some investments will lose money. That’s markets. Choice is the protection.
ICAN Law exists to protect your right to choose.
Author Bio: Nick Morgan is President of the Investor Choice Advocates Network (ICAN), a nonprofit public interest litigation organization advocating for economic liberty, capital formation, and entrepreneurship rights on behalf of small investors and entrepreneurs facing SEC and FINRA overreach.
