How a proposed investor exam to expand private-market access could work

On Wednesday, the SEC unanimously voted to seek public comment on a proposal allowing investors who pass an exam to qualify as accredited investors. That could potentially open a new pathway to private market investments. The SEC said FINRA would develop the exam. Anyone age 18 or older could take it. If they pass the test, they could opt in to accredited investor status. But there's no exam to take yet. It's just a proposal. Some industry leaders welcome the plan. >> I do think the world is changing and so inherent in that is the willingness and understanding of people who want access to do what it takes in terms of testing and qualification. >> An SEC official said the test could cover investors understanding of securities and investment structures, investment risks, disclosures, and financial statements, conflicts of interest, and corporate governance. Financial knowledge though is not the same as financial capacity. Some say a test may not show whether someone can afford to tie up money in risky illiquid investments. >> I can pass any FINRA test, but that still does not indicate whether or not my personal financial situation, my emergency savings, my retirement accounts, my personal checking and savings account, my income, my family's situation, you know, all of those things are not considered. >> Today, most individuals generally qualify as accredited investors by having $200,000 in annual income or $300,000 for couples in each of the last 2 years with the same expected this year or at least $1 million net worth excluding a primary home. The new SEC proposal is the Trump administration's latest push to expand access to private markets.