Understanding the INVEST Act: A New Era in U.S. Securities Law

On December 11, 2025, the U.S. House of Representatives passed the Incentivizing New Ventures and Economic Strength Through Capital Formation Act of 2025, also known as the INVEST Act. This bipartisan legislation aims to modernize U.S. securities laws, creating avenues for investment opportunities, bolstering support for small businesses, and reinforcing public markets to help promote economic growth. The Act passed with a vote of 302-123, and now it awaits further consideration in the Senate, where its future remains uncertain.

Codification and Expansion of the ‘Accredited Investor’ Definition

A significant aspect of the INVEST Act is the proposed amendments to the definition of “accredited investor.” Section 201 of the Act aims to revise and codify the current definition, which is primarily outlined by the U.S. Securities Exchange Commission (SEC) in Rule 501(a) of Regulation D. Here are the key elements being addressed:

Net Worth-Based Standard: Individuals whose net worth exceeds $1 million (excluding their primary residence) would continue to qualify.
Income-Based Standard: Individuals with an income over $200,000 (or $300,000 jointly) in each of the last two years, with expectations of similar income in the current year, also remain eligible.
Broker-Dealers and Investment Advisers: Certain licensed brokers and advisers will retain their accredited status.
Professional Designation: Professionals may qualify depending on their education or job experience, verified by a self-regulatory organization.

Notably, if enacted, the SEC would adjust these thresholds for inflation every five years, a measure they have considered but never implemented. Furthermore, Section 203 of the INVEST Act proposes a new pathway for accreditation through an SEC-established examination, making it easier for others to gain accredited status based on demonstrated financial knowledge.

Exemption from ‘Investment Company’ Status for 403(b) Plans

Section 202 of the Act aims to broaden investment opportunities specifically for 403(b) plans that cater to employees in public, nonprofit, and religious sectors. By amending the Investment Company Act of 1940, custodial accounts and other retirement assets would be excluded from the definition of “investment company.” This change would enable sponsors of 403(b) plans to invest in collective investment trusts (CITs), thereby providing participants with better investment options compared to the current limitations of annuities and mutual funds.

Enhancements for Registered Closed-End Funds and Business Development Companies (BDCs)

Another key part of the INVEST Act is Section 206, which proposes to enhance the regulatory frameworks governing registered closed-end funds and BDCs. The amendments would allow these funds to invest in private funds, limiting the SEC’s ability to impose restrictions on such investments.

This section is particularly timely given recent changes in SEC policy regarding the investment capacity of registered funds in private securities. Such liberalization may foster growth in these markets while also safeguarding against unwanted influence from activist hedge funds, thanks to updated anti-pyramiding rules.

Broader Exemptions for Venture Capital Funds

The INVEST Act also targets the venture capital sector, seeking to broaden the exemptions available to qualifying venture capital funds. Section 108 proposes to increase the maximum permissible number of beneficial owners in a venture capital fund from 250 to 500 and raise the aggregate offering limit from $10 million to $50 million. This change would enable venture capital fund managers to raise larger funds while still avoiding the regulatory burden of registration, fostering increased investment activity.

Electronic Delivery of Regulatory Documents

A forward-looking provision in the INVEST Act is its directive for the SEC to propose rules permitting electronic delivery (e-delivery) of regulatory documents. This includes various essential materials like prospectuses, shareholder reports, and account statements. By adopting e-delivery, the financial services industry could see substantial cost savings, reduce reliance on paper documentation, and help enhance access to information for investors.

Expansion of Well-Known Seasoned Issuer Eligibility

The Act would revise criteria for designating Well-Known Seasoned Issuers (WKSIs), which would simplify the registration process for certain companies. An issuer would qualify as a WKSI if its equity’s aggregate market value exceeds $400 million or if it meets existing WKSI requirements. This change could significantly facilitate market activity and broaden investment opportunities.

Establishment of a Senior Investor Task Force

In a proactive step to protect aging investors, Section 204 proposes the establishment of a Senior Investor Task Force within the SEC. This specialized group would focus on issues impacting investors over 65, aiming to enhance investor protection. The task force’s unique mandate and structured approach may help mitigate the risks faced by senior investors, especially as fraud tactics evolve.

Implications for the Financial Services Industry

While the INVEST Act is still in its infancy and must navigate further legislative processes, its potential effects on the financial services industry are significant. Should it pass, the provisions could expand access to investment strategies traditionally reserved for institutional investors, simplify document delivery, and enhance protections for vulnerable populations.

Ongoing vigilance is needed as the Act progresses through legislative channels. Industry stakeholders, including investment advisers and fund managers, should carefully assess how these proposed changes might affect their operations and strategies.

For any inquiries or discussions on the potential implications of the INVEST Act, stakeholders may consider reaching out for guidance. Keeping abreast of evolving regulations will be crucial for maintaining compliance and unlocking new investment opportunities in the changing landscape.