How Much Investment Protection for the 1%?

"Who's Rich (or Smart) Enough for High-Risk Investments? asks Paul Sullivan in his Wealth Matters column. My first thought was, "Who cares?" Millionaires should fend for themselves.

Second thoughts:

The wealth requirement for an "accredited investor" – that is, someone deemed rich and smart enough to be allowed to buy private stock placements, hedge funds and other goodies – hasn't been substantially changed in a generation. Adjusting for inflation, the $1-million minimum ought to be more than $2 million now.

One or two million bucks doesn't make an investor smart. In seeming acknowledgement, really hot offerings seem restricted to a more elite group of "qualified" investors – individuals with at least $5 million and institutions with at least $100 million.

"Originally," Sullivan notes, "the Securities Act of 1933 aimed to provide more information on securities to prevent investors from being manipulated. Those who were exempted from these requirements were believed to possess enough knowledge to make informed choices." Really? Can general knowledge compensate for lack of specific information? (Look at the "accredited investors" who put their money with Bayou or Madoff, and sometimes both!)

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On the whole, the net-worth 1% probably should be left to look out for themselves. Still, it's scary to read of legislation that would allow brokers to peddle private placements via cold calls. Just imagine how frenetic the Silicon Valley Feeding Frenzy would become.