Some Cigarettes: Accreditation, Memes, Naughty ESG
Money Stuff: The Podcast
Deep Dive
What is the current income requirement to be considered an accredited investor?
To be considered an accredited investor, an individual must have an annual income of at least $200,000 or a net worth of $1 million, excluding the value of their primary residence.
Why is there a push to change the accredited investor rules?
There is a push to change the accredited investor rules because the current criteria, which are not indexed to inflation, now apply to about 20% of households. Critics argue that the rules unfairly limit access to potentially lucrative private investments to those with wealth, rather than financial knowledge or sophistication.
What is the significance of the Senate's proposal for an SEC exam for accredited investors?
The Senate's proposal for an SEC exam aims to allow individuals to become accredited investors by demonstrating financial knowledge through passing an exam, rather than solely based on income or net worth. This could democratize access to private investments and align investor qualifications more closely with financial sophistication.
How has Robinhood's strategy evolved regarding its user base?
Robinhood is evolving from being a platform for casual, fun trading to targeting more serious, long-term investors. They are introducing features like index options, a desktop trading platform, and matching bonuses for transferring assets to Robinhood, aiming to become a one-stop shop for both trading and retirement savings.
What was the issue with WisdomTree's ESG ETFs that led to a $4 million fine?
WisdomTree was fined $4 million for mismarketing its ESG ETFs. The firm claimed these funds excluded companies involved in fossil fuels and tobacco, but due to errors in data purchased from third-party vendors, they inadvertently included companies with minor involvement in these industries, such as retailers selling cigarettes.
What challenges do ESG funds face in terms of regulation and public perception?
ESG funds face challenges due to the lack of a standardized definition of what constitutes ESG, leading to varied interpretations and implementations by different issuers. This can result in public skepticism and regulatory scrutiny, especially when funds do not adhere to their stated ESG principles, as seen in the case of WisdomTree.
- The current accredited investor criteria ($200,000 income or $1 million net worth) are not indexed to inflation, leading to an increasing number of qualified individuals.
- A proposed Senate bill suggests creating an SEC exam to determine accreditation, aiming for a more merit-based system.
- Concerns exist about the alignment of brokers' interests with clients, particularly regarding high-fee complex private market investments.
Shownotes Transcript