The irony: SEC Commissioner Elad L. Roisman does not qualify as an accredited investor.

The SEC is proposing to amend the rules that define the term “accredited investor,” a class of investors allowed to invest in private market investments such as hedge funds and startups. The threshold to qualify as an accredited investor is currently $1 million.

Retail investors have been chafing at the bit to be allowed into these hot, risky but potentially very profitable investments. The SEC, on its part, has sought to shelter retail investors from the risks in these trades because these investment avenues are not strictly regulated. Everyday investors could fall prey to fraudulent, fly-by-night operators. Moreover, their investing unsophistication and lower net worth make them especially vulnerable, in the SEC’s view.

However, the regulations defining “accredited investor” are decades old and perhaps needed a relook, according to Bloomberg. The SEC passed the changes Wednesday by a 3-2 vote, split along party lines.

Clayton’s initiative to reform “accredited investor.”

The changes allow people holding professional financial certifications such as Series 7, 65, and 82 licenses to access these private investments. Furthermore, the SEC will also permit “knowledgeable” employees at wealth management firms to invest in offerings by their firms. The annual salary threshold will remain at $200,000 for individuals and $300,000 for couples. Moreover, the net worth test will continue to be $1 million, not counting the value of a home.

SEC Chair Jay Clayton has pushed the reform forward.

“Today’s proposals are an important step in our ongoing efforts to assess the private offering framework as a whole, including ways to increase the opportunity for more of our Main Street investors to participate in the private capital markets,” Clayton said.

Republican SEC Commissioner Elad Roisman supported the proposals. However, he noted that he did not qualify under either the old or new rules as an accredited investor. [In his previous role as Securities Counsel for the U.S. Senate Committee on Banking, Housing, and Urban Affairs, he counseled Chairmen Mike Crapo (R-ID) and Richard Shelby (R-AL), as well as members of the Committee, on securities, financial regulation, and international financial matters.]

“There is a serious risk to retail investors, particularly elderly investors who have spent a lifetime saving for retirement,” objected SEC Commissioner Allison Lee.

The SEC will now place its proposals in the public domain for 60 days for comments. After that, the commission will vote again to finalize the proposals.

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