Mom-and-pop investors hoping to jump on the next hot tech start-up before it goes public may soon get their wish — and it could cost them.
In August, Jay Clayton, chairman of the U.S. Securities and Exchange Commission, spoke at a conference in Nashville, outlining plans that would make it easier for individuals to invest in private companies that haven't yet gone public.
"We should also consider whether current rules that limit who can invest in certain offerings should be expanded to focus on the sophistication of the investor, the amount of the investment or other criteria rather than just the wealth of the investor," Clayton said in his Aug. 29 prepared remarks at the 36|86 Entrepreneurship Festival in Nashville.
He also said that the agency's staff is working on a concept release that will address the matter.
Under current regulations, so-called private placements — the sale of securities directly to an investor, rather than through a public offering — are only available to a small group of well-to-do individuals, known as accredited investors.
These individuals must have earned income that exceeded $200,000 in each of the last two years ($300,000 if married) and they must reasonably expect the same for the current year.
These investors must also have a net worth exceeding $1 million, excluding the value of their primary residence.