General Assembly Resolution #642 “Sophisticated Investors Protocol” (Category: Regulation; Area of Effect: Consumer Protection) shall be struck out and rendered null and void.
Recognizing the complicated and volatile nature of several investor instruments and products,
Concerned that existing legislation intended to reserve high-risk investments to those qualified to competently act in response to their risk factors makes several fatal errors that render it unable to actually effect its intended mandates,
Disappointed by the unnecessary denigration of non-expert investors in the terminology chosen in GAR #642,
The World Assembly hereby repeals GAR #642, “Sophisticated Investors Protocol”, for these several faults:
- Section 1, presumably intended to define “sophisticated investor”, fails to do so. Instead of establishing rules for identifying an investor as “sophisticated”, it merely requires member states to supply their chosen definition of “sophisticated” to certain classes of investors upon written request. Consequently, member states are left total authority to determine which entities are “sophisticated investors”.
- Were this issue not present and were member states actually required to designate sophisticated investors according to the details of section 1, member states would still have near-unrestricted latitude in practice. Section 1 describes standards for each class of investor that depend entirely on what each individual member state considers “necessary” or “sufficient”, or on what laws already exist in member states. Therefore, even if these subsections were relevant to the target’s mandates they would merely mandate member states adhere to the national standards they choose to set.
- Section 2 is rendered twice toothless, once by the equal toothlessness of section 1’s failure to establish a standard for “sophisticated” investors, and once more by the structure of its text, which merely requires that member states classify themselves as sophisticated investors in order to permit or make available specified high-risk investment instruments or products.
- As a consequence of the target’s combined lexical failures, member states are encouraged to identify themselves and no other entities as “sophisticated investors” to the end that the mandates of section 2 and 3 have very little effect on any member state.
- By the failure of sections 1 and 2 to achieve anything of consequence, the target is reduced to a req