Subject: File No. 265-28
From: Jerry Verseput, CFP
Affiliation: NAPFA

July 11, 2014

Regarding modifications to the definition of Accredited Investor, I urge the committee to take into account whether an investor is working with a licensed professional advisor. After years of due diligence I have incorporated several funds into my practice that utilize conservative, straightforward investment strategies, but nevertheless require investors to be accredited. I tend to view net worth and salary levels as a poor indicator of investor sophistication in the first place, but if they are paying a professional to do the research, that should factor into the criteria.

Alternative investment funds that focus on steady, low-volatility returns allow investors to tradeoff some amount of liquidity risk for return, which I believe is a valid tradeoff whether an investor has $1M of liquid net worth or not. Simply raising the bar from a net worth or salary standpoint effectively disqualifies a larger band of investors from accessing investments that can provide excellent diversification. Not all non-registered alternative investments use sophisticated, hard to understand strategies. Some are simply too small to bear the cost of registration. It has always struck me as silly that many of my clients are not allowed to invest in a fund that holds high-quality, 1st position mortgage notes, but can put 100% of their portfolio in Tesla stock if they want to.