SEC Chair Warns Against Easing Investor Protections

According to Odaily, outgoing U.S. SEC Chair Gary Gensler has cautioned the next administration to maintain protections for small traders. In a recent interview, Gensler warned that reducing disclosure requirements or broadening the definition of 'accredited investors' could harm public interests. Critics argue that while these rules protect retail traders from private investment risks, they also hinder growth. 'Project 2025,' an initiative aimed at providing policy guidance for the incoming Trump administration, suggests expanding or removing these investor restrictions.

Gensler emphasized that excessive changes could undermine a crucial part of the capital markets, highlighting the importance of comprehensive disclosure for investor confidence and market stability. He stated that investors should be able to decide on risks based on full, fair, and truthful information from issuers. Disclosure is central to SEC regulations and helps investors assess risks, though private companies, including startups, are largely exempt.

Currently, individuals meeting certain professional or income thresholds, such as a net worth exceeding $1 million excluding their primary residence, may qualify as accredited investors. When this definition was introduced in the 1980s, it covered about 1% of the U.S. population. By 2022, the SEC estimated that over 18% of U.S. households would qualify.

Key lawmakers, including House Financial Services Committee Chair French Hill, advocate for expanding this definition. Hill proposed a 2023 bill allowing individuals who demonstrate understanding of the subject to invest in private markets. Supporters of updating the definition argue that it poses significant barriers to wealth accumulation for Black, Latino, and other minority communities.

In December, President-elect Trump announced former SEC Commissioner Paul Atkins would lead the agency. During his tenure and private sector work, Atkins has spoken against unnecessary corporate disclosures, citing their impact on investment opportunities.

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