Verret in Washington Times: Provide Equal Opportunity for Success
Some of President Obama's actions favor the wealthy over lower-income earners says Professor J.W. Verret in an op-ed appearing in the Washington Times.
"Because of their risk level, we typically think of hedge funds and private equity funds as reserved for the very wealthiest investors. While that may be true, it doesn't have to be the case. If not for the approach taken by the Securities and Exchange Commission (SEC) and the administration, ordinary investors could have a chance to invest smaller amounts and enjoy a chance at tremendous returns," says Verret.
"Instead of imposing rules that discriminate against different income groups, Congress and the administration should provide the same opportunities to everyone," Verret explains, saying that "the president should support policies that provide equal opportunity for success, regardless of income earned."
Obama keeps poor in their place, Washington Times, April 30, 2012. By J. W. Verret.
"Historically, the SEC created a market for these securities exempt from many of its public-offering rules. The exemption relaxed the rules only for offerings to investors who were personally worth at least $1 million. Unfortunately, the Dodd-Frank Act raised the wealth threshold for those wanting to participate in the securities market by no longer letting investors include the value of their homes in determining whether they make the cut. Investors near the threshold typically have about one-third of their wealth invested in their home. This rule change ensures that only the top 1 percent of Americans will have access to these lucrative deals.
"Proponents of the rule argued it was necessary to protect investors from being cheated in markets that are subject to fewer regulations. But there is no evidence that fraud is more common in exempt markets than in those more tightly regulated by the SEC. The logic behind the idea that personal wealth makes one a sophisticated investor able to uncover fraud is also suspect. Paris Hilton probably could use the protection of the securities laws more than your local financial adviser, and yet the SEC relaxes its rules for Ms. Hilton but not for a certified financial adviser if he isn't wealthy enough."