Wealthy might not always mean savvy

Hedge

TEXT OF STORY

Doug Krizner: So far this year, the average hedge fund is up more than 10 percent. With returns like that, small investors may be tempted to jump into the game. But the SEC may make getting into a hedge fund more difficult. The commission wants to raise the net worth requirements from a million dollars to 2.5 million.

Comments on this proposal are due today, and some critics are asking, what's wealth got to do with it? Marketplace's Steve Tripoli has more.


Steve Tripoli: The SEC worries that the housing boom and surge in assets created loads of paper millionaires eager for big returns, but not ready to swim with hedge-fund sharks.

Securities lawyer Ron Geffner says this is the wrong way to guard the gates, however.

Ron Geffner: What this is doing, is they're gonna keep out the person who may be sophisticated, but just doesn't have a ton of money.

For instance, Geffner says the SEC would shut out a savvy but unrich economist.

Geffner: They're assuming the barometer for intelligence is wealth. That's the other issue I have with this whole analysis.

Commenters on the SEC's website seem equally unimpressed. One put it this way: "Fear, greed and stupidity are as prevalent among individuals with wealth as many with more meager finances."

Another said the new rules would let his 90-year-old grandmother with no investing experience play. But they'd exclude a young Warren Buffett.

I'm Steve Tripoli for Marketplace.

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