Could the days of the “accredited investor” be numbered? In its current incarnation, perhaps.
At least that was the sentiment expressed by Michael Piwowar, acting chairman of the Securities and Exchange Commission, at the annual SEC Speaks conference in Washington, D.C., on Feb. 24, 2017.
In a speech with the theme “Remembering the Forgotten Investor,” Piwowar lamented what he regards as the outdated notion that only those individuals “lucky enough” to have attained a certain annual income or net worth should be able to invest in high-risk, high-return securities or private placements.
The threshold – an individual income of $200,000; a joint income of $300,000; or a net worth exceeding $1 million, not including a primary residence – was designed to protect small-scale investors from losing money on risky investments. But Piwowar noted that current rules actually put those “forgotten investors” at a disadvantage by denying them the chance to include high-risk, high-yield investments in a diversified portfolio that, considered in its entirety, is actually risk-balanced.
“In my view,” he said, “there is a glaring need to move beyond the artificial distinction between ‘accredited’ and ‘non-accredited’ investors. I question the notion that non-accredited investors are truly protected by regulations that prevent them from investing in high-risk, high-return securities available only to the Davos jet set. … even a well-intentioned policy of investor protection can do more harm than good, for instance, by exacerbating inequalities of wealth and opportunity.”
Piwowar’s stance mirrors the directive to staff from former SEC chair Mary Jo White to recommend revising the accredited investor definition to allow individuals to qualify based on other criteria.
The five-person SEC is, like many federal agencies and institutions, in transition while awaiting a permanent chairman and full staffing. Currently only Piwowar and Democrat Kara Stein sit on the panel. Speculation is that President Trump’s nominee to head the SEC, Wall Street lawyer Jay Clayton, will continue the administration’s deregulatory agenda.
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