Expanding Public and Private Capital Markets in the United States

Gaining access to financial capital – whether via equity or debt – is essential to the creation and growth of businesses. At the same time, access to capital remains a major challenge for entrepreneurs starting up and building enterprises across our economy. And since the financial crisis and Great Recession, it arguably has become more difficult to access capital from institutional banks and various capital market players.

(2017 Testimony by Raymond J. Keating Chief Economist Small Business & Entrepreneurship Council Before the Subcommittee on Capital Markets, Securities, and Investment Committee on Financial Services U.S. House of Representatives.)

On February 26, 2025, the House Financial Services Committee held a Capital Markets Subcommittee meeting (the “Capital Markets hearing” or “Subcommittee hearing”) entitled, “The Future of American Capital: Strengthening Public and Private Markets by Increasing Investor Access and Facilitating Capital Formation.” 

The hearing, (the method by which committee members gather information on any particular subject), was led by Subcommittee Chair Ann Wagner. Its main purpose was to discuss increasing investor access to both public and private markets, to reduce regulatory barriers and expand opportunities for small businesses and underrepresented minorities and women.

During the Capital Markets hearing, the Subcommittee reviewed the Jumpstart Our Business Startups Act (JOBS) of 2012 to assess how effective it has been over the past 13 years in promoting access to capital and reducing regulatory barriers for small businesses and underrepresented entrepreneurs and communities. 

The Subcommittee also reviewed a number of other relevant pieces of legislation. Among them were:

• The Fair Investment Opportunities for Professional Experts Act (Hill), and

• The Accredited Investor Definition Review Act (Huizenga) bill.

The Fair Investment Opportunities for Professional Experts Act proposes expanding the definition of “accredited investor” to allow individuals to qualify based on relevant licenses, education, or job experience — not just net worth. 

The Accredited Investor Definition Review Act would require the Securities and Exchange Commission (SEC) to review the list of qualifying certifications, designations and credentials for “accredited investor” status every five (5) years and add other credentials or certifications that are substantially similar.

Below we will examine some of the main points made at the Capital Markets hearing.

But before we do that, let’s take a brief look at capital markets and why they are so important.

The Importance of Capital Markets 

Capital markets facilitate the movement of funds between buyers and sellers who trade financial assets like stocks, bonds, and other currencies. They are considered the bedrock of our nation’s economy because they facilitate the transfer of funds between those who need it (for example, new or growing businesses) and those who want to invest their money (i.e., institutional and individual investors). They are also instrumental in creating jobs, protecting against risk, and promoting innovative technologies. 

In 2021 alone, U.S. capital markets provided 75.4% of all funding — debt and equity — for small businesses in the United States. 

Capital markets generally trade equities or debt securities, and are separated into two different categories: primary markets and secondary markets. These individual markets (i.e., primary and secondary) have distinct differences, requirements, and regulations that apply to them. 

Robust capital markets are critical for starting or growing businesses, promoting innovation, and funding city, state, and federal government projects. 

However, there is a longstanding tension between promoting access to capital, while at the same time protecting investors. Regulators have struggled with this issue for years. As the recent Capital Markets hearing illustrates, finding the right balance between these two competing interests continues to be an issue that politicians and regulators grapple with.  

Key Takeaways from the Capital Markets Subcommittee Hearing

In her opening remarks, Subcommittee Chair Ann Wagner (MO-02) emphasized that capital formation is critical for economic growth and noted that obtaining funding is essential for small businesses. She asserted that, while the JOBS Act of 2012 has done much to relieve some of the regulatory barriers small businesses face when raising capital, many obstacles still remain. 

In particular, Subcommittee Chair Wagner pointed to the restrictive definition of “accredited investor” as creating a significant barrier to capital formation for most small businesses. The current regulations allow only verified investors to participate in private offerings, and require issuers to verify accredited investor status to make sure that only verified investors participate in private offerings. 

According to Subcommittee Chair Wagner, the current definition of “accredited investor” — which centers on wealth metrics — allows only high-net-worth individuals and institutions to participate in private markets. This shuts out investors who may have financial expertise and knowledge, but who do not have the required level of net worth set by the Securities and Exchange Commission (SEC) in its definition of “accredited investor,” from participating in capital investment opportunities. To address this defect, Subcommittee Chair Wagner asserted that the definition of “accredited investor” needs to be expanded. In  her view, a more expansive definition of “accredited investor” would “unlock new sources of capital benefiting both businesses and investors.”

Because the definition of “accredited investor” limits who can participate in private offerings, many small businesses are compelled to seek funding from banks. And yet, bank loan approval rates have dropped significantly — making it more difficult for small businesses to get funding — and severely limiting their funding options. According to Subcommittee Chairman Wagner, making it easier for companies to raise private capital and expanding the number of individuals who can qualify as accredited investors, will increase the funding options available to small businesses. It will also allow more investors to participate in economic growth.

Subcommittee Chairman Ann Wagner cautioned that a balance must be struck between protecting investors and regulating the industry so strictly that it drives companies overseas or suffocates market access to capital. She advocated having regulations that allow companies the flexibility to grow, while ensuring that public and private markets “remain viable funding options.”  

“Access to Capital is not a Partisan Issue.”

Finally, Subcommittee Chairman Ann Wagner argued that “access to capital is not a partisan issue.” Assisting small businesses to obtain the funding they need promotes innovation and jobs. This, in turn, strengthens our economy — helping everyone, regardless of political affiliation. 

Other representatives agree. In testimony provided in 2011 before the Senate Committee on Banking, Housing and Urban Affairs, Jack E. Herstein, President of the North American Securities Administrators Association, Inc. and Assistant Director of the Nebraska Department of Banking & Finance, Bureau of Securities, pointed out that the success of small business is America’s success. Achieving a balance between protecting investors and promoting small business growth and entrepreneurship is essential for America’s economic well-being.

Regardless of which side of the aisle you are on politically, one thing is certain: the securities laws touch on a vast number of financial and investment issues of importance to business owners, investors, and issuers alike. VerifyInvestor.com makes verifying accredited investors easy, cost-effective, secure, and reliable. Our services, (which also include AML/KYC checks, qualified purchaser, and qualified client verification), are always code-compliant and confidential. We help companies fully and easily comply with their legal obligations to verify accredited investors.