The Securities and Exchange Commission’s criteria for accredited investors, who are most of the people the agency allows to invest in private deals, was attacked as misleading by investor advocates.

During the SEC Investor Advisory Committee meeting on Thursday, Committee Member and Consumer Federation of America Director of Investor Protection Barbara Roper said the agency’s criteria -- which use only income and assets -- really do not tell how well retail investors are able to fend for themselves.

“There will never be a (financial) threshold that will serve as a good proxy for sophistication,” said Roper.

She said using financial-knowledge certifications and tests and other means of establishing investment savvy would be ideal, but would be difficult to implement.

The current standards for accredited investor are $200,000 in income ($300,000 for a couple) or net worth of $1 million.

These guidelines have been unchanged since they were set. If the numbers were increased for inflation, which has been suggested, the thresholds would be near $500,000, $750,000 and $2.5 million.

The four-year old Dodd-Frank Act requires the SEC to review the standard.

Roper said only the savviest investors should be allowed to put their money into private offerings because these investments lack liquidity and transparency.

While some on the panel said they were worried that tightening the requirements for accredited investors could significantly shrink the amount of money available to non-public companies, Roper said only a tiny percentage of people who qualify as accredited investors actually make investments in private offerings.

Yet, Council of Institutional Investors Executive Director Ann Yeager said there is a line between protecting investors and taking away their legitimate right to make some investments.

Discussions during the hearing included whether some assets, such as retirement savings, should be included in accredited investor calculations and whether the amount a person could invest in private offerings should be a percentage of their total assets.

In arguing against tighter guidelines for accredited investors, George W. Bush Institute Executive Director James Glassman said people are willing to take important actions, like buying a home and raising children, without being heavily restricted.

AFL-CIO Policy Director Damon Silvers said there is no way the dollar amount of someone’s assets can be an accurate indicator of investing sophistication.

Now, the SEC accepts statements by retail investors that they meet the accredited investor wealth and income standards.

But University of Denver Law Professor Jay Brown said self-certification fails to protect unwary investors. If an investment sounds good, even if it’s too good to be true, some individuals will be tempted to lie to take advantage of it, he said.

The Investor Advisory Committee did not make a recommendation to the SEC on accredited investor guidelines.