SEC asks FINRA for an accredited-investor exam that tests know-how

Paul S. Atkins, the SEC chairman, has directed agency staff to work with FINRA on an exam that would let retail investors qualify for private-market securities by demonstrating financial sophistication. AdvisorHub reports the directive is in a report the agency issued in late July.

Most private placements are sold under Regulation D, whose eligibility rules have looked at wealth, not know-how, since 1982. An individual needs $200,000 a year in income. The alternative is $1 million in net worth, excluding the family home.

A 2020 SEC amendment added a professional route: holders of the Series 7, 65, and 82 licenses already qualify. The exam proposal would extend that logic to the investing public at large.

The idea has circulated in Washington for decades. It picked up momentum in August 2025, when President Trump ordered the SEC to consider revising the definition. The July report answers proposals from the agency's March capital-formation forum, including one to expand the accredited-investor definition to cover 'additional measures of sophistication, including through an investor test and experience.'

The securities industry supports the test. Kenneth E. Bentsen Jr., president of SIFMA, told a Senate committee on August 6 that the current standard 'unfairly limits Americans' participation in capital markets.' Investor-protection advocates disagree.

Benjamin Schiffrin, director of securities policy at Better Markets, sees inflation as the real problem. In 1983, 1.8% of the investing public qualified as accredited. By 2022, the share was more than 18%, he says. He would raise the wealth thresholds instead of creating a test.

For advisors, an exam-based path would change how private-market placements begin. Today the conversation starts with a net-worth statement and a signature page. With an exam, it would start with what a client can explain about the product, the liquidity terms, and the risk.

A likely effect is a wider pool of clients eligible for private-placement sleeves, and a new line in the compliance file alongside the wealth attestation. How the SEC and FINRA would design the exam, and whether FINRA agrees to run it, are unconfirmed.

An exam cannot measure loss absorption. A client can answer every question about private credit and still flinch at a 20% mark-to-market hit. The net-worth test exists because investors need to show they can absorb the financial consequences of a private-market loss; a test score is not the same evidence.

The advisor's own suitability review is the final check. The credential would add a qualification, not replace judgment about whether an illiquid sleeve belongs in a particular portfolio. The 2020 license amendment already conceded that a credential can stand in for wealth. How many people get to sit for that credential is the open question.