The U.S. Securities and Exchange Commission is meeting Tuesday to discuss potential changes to the definition of an “accredited investor.” While this type of legal nuance may seem boring, it could have major implications on startups and peer-to-peer lenders like LendingClub Corp LC 0.43%.

In order to qualify as “accredited,” an investor must meet one of the following two criteria:

• 1. Individual income of $200,000 or more (or joint income with a spouse of $300,000 or more) in each of the last two years and a reasonable means of maintaining that income level in the future.
  2. Net worth of more than $1 million, excluding the value of a primary residence.

As it stands, accredited investors are the only investors allowed to invest in non-publicly offered investments.

The Arguments

The debate the SEC is likely having is whether are not to adjust the income/net worth requirements for an accredited investor. On one side, there’s an argument to be made that the thresholds should be increased to keep pace with inflation. In fact, this was the conclusion that the SEC staff reached when it made its recommendation back in December.

Another camp believes the income/net worth standards should remain in place, but that other criteria such as education and/or experience should be considered as well.

“Put another way, they believe an individual should not have to be rich in order to qualify as an accredited investor,” Crowd Funding Legal Hub’s Anthony Zeoli explained.

Depending on which way the SEC rules, peer-to-peer lending sites could see their pools ofeligible lenders change dramatically.

If the SEC lowers the thresholds, companies like SoFi, which require all lenders to be accredited, could see…

Click here to continue reading

Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!