The Accredited Investor Rule Should Be Redefined, Not Erased
It should not come as a surprise that there is a general push emanating from Washington for less regulatory oversight, which is the context for recent comments by the acting SEC chairman supporting greater investor access to certain private and exotic investment strategies.
While far-out actions and ideas have never been foreign to the politically charged world inside the Beltway, we can only hope this proposal is little more than an ill-fated trial balloon.
The suggestion, as laid out during a speech by acting Securities and Exchange Commissioner Michael Piwowar, is to revise and possibly remove the definition of an accredited investor, which for 35 years has basically meant rich folks.
From Mr. Piwowar’s perspective, the accredited investor rule has produced “forgotten investors,” who haven’t been able to benefit fully from the potential returns and diversification provided by products like hedge funds and private placement strategies.
“In my view, there is a glaring need to move beyond the artificial distinction between ‘accredited‘ and ‘nonaccredited’ investors,” Mr. Piwowar said. “I question the notion that nonaccredited investors are truly protected by regulations that prevent them from investing in high-risk, high-return securities available only to the Davos jet set.”
Style points should be awarded for Mr. Piwowar’s nimble mount aboard the populist wave, but we see it differently.