Subject: File No. S7-08-19
From: Michael S Finke, Ph.D.
Affiliation: Frank M. Engle Professor of Economic Security, The American College of Financial Services

September 22, 2019

Older investors are more likely to meet accredited investor wealth and income thresholds. Advanced age is also associated with cognitive decline that can affect the ability to evaluate complex financial securities. The attached file presents research that evaluates whether accredited investors over age 80 possess greater financial sophistication than younger nonaccredited investors. Investors over age 80 who meet the current accredited investor definition are 80% less likely to achieve high financial literacy scores than nonaccredited investors age 60-64. This sharp decline in financial capability mirrors declines in measures of cognition in old age.

Recent studies find evidence that brokerage firms employing a higher percentage of advisers with records of prior misconduct cluster in regions with a high percentage of residents over age 65. In 2019, the SEC charged a broker of unregistered securities with operating a $1.2 billion Ponzi scheme fraud that targeted seniors.

Without modification of the existing accredited investor definition, there is a risk that lower quality securities will increasingly be marketed to vulnerable older, wealthier investors. Reduced financial capability among older investors suggests that the SEC should consider exempting investors over age 80 from accredited investor eligibility unless working with a financial advisor subject to a fiduciary standard of care.