The American Institute of CPAs has submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) supporting the agency’s proposal to expand the definition of accredited investors to include licensed CPAs.
Accredited investors can hold and trade unregistered securities in private offerings and are a key facilitator of capital formation for startups and small businesses. Because the SEC wants to ensure sufficient financial sophistication in these transactions, it has set thresholds around accredited investors’ cumulative wealth and annual income. The agency also has created exemptions to these thresholds for certain categories of savvy professionals, such as Series 7 license holders. Under the current SEC proposal, licensed CPAs in good standing would join that list of exemptions.
“A licensed CPA has demonstrated a substantial understanding of financial reporting, accounting principles, risk assessment, and business operations,” Susan Coffey, the AICPA’s CEO of public accounting, wrote in the comment letter. “In many cases, a CPA may possess a greater ability to analyze complex financial information than an individual who qualifies solely because of net worth or income. Recognizing CPAs as accredited investors would further align the accredited investor framework with its underlying purpose: identifying individuals capable of making informed investment decisions.”
The AICPA comment letter notes the many categories of financial analysis that characterize a CPA’s work, including financial statement audits, corporate disclosures, internal controls and business valuation considerations. From an investor protection standpoint, it also states that CPAs are subject to state board oversight, professional ethics requirements and continuing professional education requirements.
The SEC is receiving comments on its accredited investor proposal through Dec. 4.
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Tags: Accounting, AICPA, equity, investments, SEC
