If you meet some simple requirements of income or net assets, you may qualify as “accredited” investors and access to the vast universe of complex private investment. But to do is return visit outweigh the risks?

This issue is being hotly debated on the occasion of the approval, potential changes in investor definition. US Securities and Exchange Commission is studying the expansion of the definition, so that more investors into hedge funds, private equity and other non-public offering of possibilities. But some scholars and investor advocates that the definition should be changed to reduce risks to protect small investors from these products, which may include high costs and poor disclosure.

The problem is particularly important to older investors, uh, its massive retirement accounts often qualify for their accredited investor. Those who seize the opportunity to invest in non-public offering may benefit from diversification and higher yields can come up with such an investment, or they may be sold expensive reserves. It is difficult to understand, and even harder to sell.

At present, you can become a qualified accredited investors, if your income over the past two years (or $ 300,000 jointly with your spouse) exceeds $ 200,000, you want it to reach this threshold in the current year or if your net assets of more than $ 1 million, excluding the value of your principal residence. About 16 million households, or 13% of total US households, qualify as qualified investors, according to the SEC.

The theory behiND recognized definition of investors in securities law as put out, is that it limits the investors who are sophisticated enough to private equity products, “fend for themselves” in the absence of strict supervision, and have the financial resources to withstand significant losses.

However, many qualified investors “retirees and pre-retirees, people who are not really in a good position to take risks with their own money, in most cases,” Barbara Roper, director of investor protection at the consumer Federation of America. “Who is 65, have more than they need to make in the last 25 or 30 years should not be gambling on their investment of $ 1 million man.”

Revised definition

In 2019 in the United States Securities and Exchange Commission requested public comment on a number of potential changes recognized definition of investors, such as allowingA certain minimum amount of investment in certain occupations or qualifications individual to qualify. US Securities and Exchange Commission also proposes to expand the definition, including who is a registered financial professionals recommend that the possibility of any investor.

Some industry groups applauded the expansion of recognition, the idea of ​​investor definition. Replace the current threshold value “from the pursuit of current only to qualified investors the opportunity to eliminate complexity, otherwise qualified investor” in the product portfolio Institute sent a letter to the US Securities and Exchange Commission wrote.

There were also raised about the impact of the elderly investor alarm. Decline in cognitive ability, can be equipped with advanced age “may affect abiliTY evaluate complex financial securities,” Michael Fink, a professor at American University economic security of financial services written.

In a recent study, Fink found qualified investors over 80 years is more than 80% less likely to have higher scores than the non-certified financial literacy of investors 60-64 years of age, this show that the old shareholders can easily meet the accreditation, investors have not defined largely unregulated market, the ability to “fend for themselves” in. Older investors significantly reduced complexity and financial assets may be complex investment broker selling, reading notes attractive target.

Fink’s advice: “The United States Securities and Exchange Commission should consider the recognition, investment exemption qualification of 80-year-old investor,” he W¯¯ rote, unless they work with a financial advisor who acts as trustee in other words, the one who is obliged to act in the best interests of its clients. Investors “is likely to be fully able to understand these securities, they are 80, but if they will continue to invest in their 90-year-old, they need a professional who can help them pilot,” Fink said in an interview. Aimed at better coordination

Maturity risk with investors and other changes proposed national securities regulator approved withstand capability, the definition of investors. US Securities and Exchange Commission should improve the income and net worth thresholds and to consider additional conditions, as has the amount of investment, the North American Securities Administrators Association wrote.

No matter how recognized, I nvestor the definition of development, the old shareholders should be close to unregistered investment is very cautious. If you throw a private placement, “ask yourself why these enterprises are unable to obtain funds through traditional means,” Fink said.”If this is not a market, you fully understand, you’re more likely victims than a success.”