February 26, 2007
We write in opposition to the proposed rulemaking, SEC File No. S7-25-06 to the extent that it increases the threshold of attaining the status of accredited investor. The Commission states that it is concerned the current definition does not provide sufficient protection for investors and claims that the proposed change will ensure that investors are "capable of evaluating and bearing the risks of their investments."
We do not believe that increasing the wealth threshold beyond the current one is a reasonable way to protect investors. This unnecessarily removes the opportunity for such investments to a large number of investors at a time when there is more need than ever to diversify away from traditional stocks and bonds and at a time that the current accredited investors have ever more sophisticated information available to them. There should not be a retraction of investments available when there is actually a need to provide fair and equal access to the widest possible selection of investment opportunities. It should be the SEC's job to oversee the investment vehicles rather than to limit access. Required disclosure would be a much more effective way to educate the potential investor base on the risks involved. The responsibility should fall to the investor and their advisors to understand the characteristics and risks involved. The investors at the current threshold of accredited investor have much more information available today than ever in the past. Thus, the information age has provided risk assessment information such that this effect far outpaces the need to increase the traditional threshold of qualifying as an accredited investor to maintain the appropriate level of investor protection.
We believe it is an erroneous assumption that wealth equates to investment sophistication. Even the current threshold, and certainly the proposed one, penalizes smaller investors with extensive investment experience or access to sophisticated investment advice. It would be grossly unfair to small investors to further restrict them from professionally managed investments.
Therefore, we suggest the SEC focus its attention on regulation, oversight and fraud protection and allow the investor and his or her financial advisors to determine what are appropriate investments for their situation.