They moved from an objective definition to a subjective definition of "expertise". Expect many more regular people to be scammed out of their life savings.
No, they didn't. It remains objective, it just now tests expertise by objective standards, not merely wealth or income. (Which are, at best, more distant proxies for expertise than the new ones.)
> Expect many more regular people to be scammed out of their life savings.
The new added standards are less "regular people" than the the old, continued standards, so I don't think that's the case. If licensed professional investment advisors and the like are getting scammed out of their life savings because they are able to invest directly in unlicensed securities, than there is a real problem with the licensing systems or the process allowing the investments to be offered at all, regardless of investor qualifications.
I generally agree with your comment, but this doesn't make much sense. The old "$200K/300K or $1MM outside primary residence" standards are continued, right? So by definition, in raw numbers, there could only ever be at least as many "regular people"...
Um, under what part of the new standard would a "poor dentist" that would not qualify under the old standard qualify?
However, it is not possible to say since this class of professional certifications is not delineated. Dentistry may qualify. It may not.
Yes, it is quite specifically. The new rule also sets out standards (which would very much not seem to be likely to ever admit certification in dentistry) and a process for subsequent rulemaking to update the set of certifications, but any problem with certifications later adopted would be an issue with those actions, not the immediate action.
The initial set is "the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), and the Licensed Investment Adviser Representative (Series 65)". [https://www.sec.gov/rules/final/2020/33-10824.pdf, bottom of p. 28]
You cut off the critical second half of that statement, which significantly changes the meaning:
> natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution that the Commission has designated as qualifying an individual for accredited investor status
If you think the SEC would add DDS to that list, I'm not sure why you would trust them to regulate investing at all.
The reason why having money was the objective definition was because defining expertise objectively is difficult. (What are you going to do? Have a standardized test?) This problem still remains.
Like you said, having money doesn’t make you a savvy investor. However, you can typically absorb the losses with comparatively less pain. Also, since you have more money, you can make more investments, which means you gain experience, and thus hopefully better at avoiding bad investments.
The other non-financial individual qualification is also objective. Are you a certain type of employee of an investment firm? If so you can invest in that firm. None of this is subjective.
If this were about whether you can absorb losses, then it would limit the investment amount based on your financial capacity, like the JOBS Act does. There's nothing stopping a millionaire from throwing too much of their savings into questionable investments, and plenty of millionaires have gone broke doing exactly that. They probably would have been better off if they had to pass those standardized tests first, like us po' folks are able to do now.
It was always just a certification that you had an excessive amount wealth.
Sounds like you believe someone with a net worth of $900k or a salary of $190k is objectively incompetent become they're barely under the threshold.
"Objective definition." What a joke.
To me, the previous SEC rule is just an acknowledgment of the real aristocratic underpinnings of an advanced capitalist economy.
So, this won't cause any more people to lose money, but it may change the mix of things they lose it on.
And because this will also open to non-wealthy people many good deals in above-board companies, that have been scrupulously following the law & attracting rich sophisticated investors, it will also benefit those well-behaved companies and their less-rich friends, family, supporters, & customers – a win for society.
People get scammed all the time in a million different ways.
So maybe letting non-wealthy people invest into the exact same well-documented, scrupulously-legal above-board deals in which wealthier people have always been allowed to invest could be better than the traditional-but-totally-failing paternalism?
As compared to the complexity of available investment schemes, no, they probably aren't.
On the other hand, "licensed investment advisors and people currently working in investment-related roles in financial firms" are probably more savvy about investing, as a class, than "people who happen to have more than $1M in assets or $200K in personal or 300K in personal+spouse income".