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Before August their "objective definition" was just having money. Having money doesn't make you a good investor. Dentists for example are notoriously bad invest

Before August their "objective definition" was just having money. Having money doesn't make you a good investor. Dentists for example are notoriously bad investors, but prior to the change were less "protected" than a person with less money who's certified as an investment advisor.

CalChris 6y ago
However, they didn't tighten the definition to prevent rich dentists from making bad decisions. They are loosening it which will allow even poor dentists to make bad decisions.
- dragonwriter 6y ago
  > They are loosening it which will allow even poor dentists to make bad decisions. Um, under what part of the new standard would a "poor dentist" that would not qualify under the old standard qualify?
  - CalChris 6y ago
    natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution However, it is not possible to say since this class of professional certifications is not delineated. Dentistry may qualify. It may not.
    - dragonwriter 6y ago
      > However, it is not possible to say since this class of professional certifications is not delineated. 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 https://www.sec.gov/rules/final/2020/33-10824.pdf, bottom of p. 28]
    - tptacek 6y ago
      You've misunderstood the rule. It's not arbitrary professional certifications. It's those certifications the SEC designates, which right now are the Series 7 and Series 65. Nobody is going to automatically accredit dentists.
    - vonmoltke 6y ago
      > natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution 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.
jonathankoren 6y ago
I think you’re looking at this wrong. This rule was originally created in 1933 to mitigating societal economic risk. 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.
- DennisP 6y ago
  Funny you should say that because they do have standardized tests. Any of three certifications qualifies you. 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.
  - jonathankoren 6y ago
    Ironically, the accredited investor income and net worth criteria haven’t been updated since 1983. If the criteria has been indexed to inflation, you’d need a salary of $530k or a net worth of $2.6M.

CalChris 6y ago

However, they didn't tighten the definition to prevent rich dentists from making bad decisions. They are loosening it which will allow even poor dentists to make bad decisions.

dragonwriter 6y ago
> They are loosening it which will allow even poor dentists to make bad decisions. Um, under what part of the new standard would a "poor dentist" that would not qualify under the old standard qualify?
- CalChris 6y ago
  natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution However, it is not possible to say since this class of professional certifications is not delineated. Dentistry may qualify. It may not.
  - dragonwriter 6y ago
    > However, it is not possible to say since this class of professional certifications is not delineated. 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 https://www.sec.gov/rules/final/2020/33-10824.pdf, bottom of p. 28]
  - tptacek 6y ago
    You've misunderstood the rule. It's not arbitrary professional certifications. It's those certifications the SEC designates, which right now are the Series 7 and Series 65. Nobody is going to automatically accredit dentists.
  - vonmoltke 6y ago
    > natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution 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.

jonathankoren 6y ago

I think you’re looking at this wrong. This rule was originally created in 1933 to mitigating societal economic risk. 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.

DennisP 6y ago
Funny you should say that because they do have standardized tests. Any of three certifications qualifies you. 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.
- jonathankoren 6y ago
  Ironically, the accredited investor income and net worth criteria haven’t been updated since 1983. If the criteria has been indexed to inflation, you’d need a salary of $530k or a net worth of $2.6M.