From: John Sothras |
To Whom It May Concern: I hereby protest the proposed changes that would increase the definition of an accredited investor to a natural person with a net worth of over $2.5 million, exclusive of home and real estate used in business. My comments are as follows: 1. As well meaning as proposed, this would not add any more protection for investors than is already in place. Yes, there is some evidence that investors are being defrauded or experiencing losses, and I realize that the whole thrust of the proposed rules changes has come from your investigation into private pools and hedge funds and their practices, and the resulting failure of some of those entities. Due to the lack of transparency and undisclosed conflicts of interest, the proposed changes to rules 216 and 509 have found their way into the news. The proposed changes, however, in my opinion cut much too broad a swath, negatively affecting a majority of private offerings rather than focusing solely on the offending vehicles. Of course, inflation has increased the population of accredited investors, but the advent of the Internet and other media has exponentially increased the the amount of relevant information available to investors. 2. It is my belief that investors whose net worth does not conform to the proposed rules changes will be unduly punished, not only for being successful, but also by restricting their exposure to the appropriate investment vehicles suggested by their financial advisors. Our financial advisor understands the prudent man rule and the due diligence required of each investment vehicle, and if satisfied, appropriately makes the suggestion as to their viability. If these changes become law, advisors' ability to offer such investments will be severely restricted and thus take a market away from their business. It must be remembered that individuals and families investing in these non-traditional investments that require disclosure through private placement memoranda (PPM's) are performing a social good, not speculating in hedge funds and other private pools whose disclosure is limited. 3. Also, it is important to note that a significant body of current real estate owners have taken advantage of IRS section 1031 rules and, therefore, could be deprived of exchanging their real estate properties into other tax-deferred real estate if these rules changes are enacted. 4. I fail to see any evidence that higher net worth above the current requirements make investors more sophisticated. As a family, we consider ourselves accredited investors who have managed to accumulate our assets through hard work and consider ourselves financially astute, more so than the super wealthy who may have inherited their money. 5. We are investors in non-traditional vehicles typically non-correlated to equity markets, providing a degree of diversification and reduced investor risk. We understand investments can be complex, but not beyond our comprehension as accredited investors. Please keep the current rules in place or narrow the scope of the proposed changes. We appreciate your consideration of our comments. Respectfully, John Sothras |