May 22, 2020
Dear Sir or Madam:
As a non-accredited individual investor, I strongly support the adoption of "Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets," as this proposed rule provides much-needed clarification and standardization to the Reg A and Reg CF frameworks.
The proposed removal of the Reg CF investment cap for accredited investors, however, is a serious flaw in the proposed rule that is likely to eliminate many investment opportunities for non-accredited investors, and I ask that the SEC discard this element of the proposed rule.
Non-accredited investors rely on Reg CF for access to equity investment in early stage companies. Reg A offerings are often inaccessible due to large minimum investments, and Reg D offerings are not permissible. These Reg CF investments provide valuable diversification generally not available from the stocks, mutual funds, and ETFs typically marketed to individuals, that provide exposure to equity only in relatively large companies that trade on major stock exchanges.
Many Reg CF offerings seek only several hundred thousand dollars of total investment. If accredited investors are permitted to invest under Reg CF without limit, it is likely that investment from accredited investors will rapidly satisfy these small offerings. This same phenomenon occurred in early crowdfunding marketplaces such as Lending Club when institutional investors displaced individual accredited investors from desirable offerings.
Accredited investors have access to a wide variety of similarly situated equity investments, under the far more numerous Reg D offerings, as well as under Reg A and Reg CF. Accredited investors should not be permitted to abuse the limited scale of Reg CF in a way that displaces its intended participants, non-accredited "main street" investors of ordinary means.
Thank you for your time and consideration.
Best regards,
Jason D Pampena