Should the SEC Save the Gotrocks from Themselves?

As we noted last year, in his 2005 Berkshire-Hathaway letter Warren Buffet fretted at how assorted investment advisers and consultants were picking on the family he called the Gotrocks. Things went from bad to worse, wrote Buffet, when the investment helpers turned into higher-priced "hyperhelpers:"

The more observant members of the family see that some of the hyper-Helpers are really just manager-Helpers wearing new uniforms, bearing sewn-on sexy names like HEDGE FUND or PRIVATE EQUITY. The new Helpers, however, assure the Gotrocks that this change of clothing is all-important, bestowing on its wearers magical powers similar to those acquired by mild-mannered Clark Kent when he changed into his Superman costume.

Now, Robert Frank notes in the WSJ Wealth Report (subscribers only), the Securities and Exchange Commission proposes to save some of the not-so-rich Gotrocks from themselves by upping the wealth required to be an "accredited investor" in hedge funds. As Frank notes in his Wealth Report blog, the change is fairly drastic:

To invest in hedge funds today, investors need to have $1 million in net worth (including the value of their primary residence), or income of at least $200,000 for individuals or $300,000 for households. The SEC has proposed raising the bar, requiring investors to have $2.5 million in investible assets.

Frank includes a link to the mostly indignant comments the SEC has received from various Gotrocks family members.