Some individual investors are irritated at the Securities and Exchange Commission’s proposal to dramatically increase financial minimums to invest in hedge funds in the U.S., according to The Chicago Tribune.
The SEC has proposed increasing investment minimums to $2.5 million from the current $1 million minimum in net worth, which currently includes value of a home.
Investors have accused the SEC of paternalism and discrimination and dozens have written to the regulator to protest the proposal.
“I believe that limiting any type of investment based on how much money a person owns is unfair and discriminatory,” wrote one correspondent in what was typical to other comments. “The amount of money a person has to lose should not be used as a measure of that person’s sophistication as an investor.”
SEC Chairman Christopher Cox has stated the reasoning for increasing the minimums is that hedge funds are no place for mom and pop investors. Now, the agency is hearing from the mom and pop investors.
The public comment period runs until March 9, and the early comments coming in do not indicate investors are pleased with the proposal.
“It does not make sense to raise the minimum assets for investors in hedge funds and thereby [eliminate] more middle-class Americans from potential opportunities,” another e-mail to the SEC reads. “Our society is already stacked unfairly in favor of the rich and wealthy.”
Another investor stated his job requires him to put together business deals worth tens of millions of dollars, “and yet, my government is regulating my ability to invest in hedge funds—why?”
Many people are exposed to hedge funds through pension investments. Also, many mutual funds open to individuals of restricted means are mimicking investment strategies of hedge funds.
“We have enough nanny government now,” wrote an investor. “The SEC should be investigating the criminal element and leave the investing qualifications to others. If you want to control the hedge funds, get Congress to require their regulation.”
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.