Investors are younger and more diverse than before …. new federal regulations could set things back

Ralph Thomas. (File photo)

In recent years, technological innovations, a competitive market and smart regulation have removed barriers that historically excluded diverse and lower-income Americans from the stock market. Today, minority communities, young people and other underserved demographics are investing in the stock market at unprecedented numbers. But Washington regulators at the U.S. Securities and Exchange Commission are pushing new rules that would undo that progress and harm the new generation of New Jerseyans starting to build long-term wealth through investing. New Jersey lawmakers should strongly oppose these changes.

The SEC has proposed a complete overhaul of U.S. equity market structure and how stocks are bought, sold and priced. As drafted, these sweeping changes would make it harder and more expensive to participate in the stock market, undermining the ability of everyday investors in New Jersey to directly invest in stocks, pursue financial independence and create wealth.

Those who would be hurt the most are Black and other minority investors who have increased their participation in the stock market in recent years thanks to popular phone-based investment apps, low- or zero-cost trading commissions and the widespread elimination of account minimums. These factors transformed stock investing and led to a surge in investors who are younger, lower-income and more racially diverse than ever before. In fact, according to an Ariel-Schwab Black Investor Survey, 63% of Black Americans under the age of 40 now participate in the stock market. This is good news for families looking to create wealth, small businesses in our local communities and the overall strength of the U.S. economy.

However, the SEC’s proposed changes will harm these investors, while giving institutional investors an advantage. Thankfully, some politicians are speaking up for everyday investors.

New Jersey’s U.S. Rep. Josh Gottheimer (D-5th Dist.) recently joined a large bipartisan group of his colleagues in urging the SEC to pause these harmful proposals and gain more comprehensive market data before pursuing changes to our equity market structure that is serving his constituents so well. In a letter to SEC Chair Gary Gensler, they urged regulators to consider the impact of their rules on the everyday investors who benefit from today’s system: “In recent years, technological and market innovations have enabled a dramatic expansion in the number of individuals participating in our equity markets.”

Rep. Gottheimer and his colleagues want to support the SEC’s mission to make “our markets more fair and competitive for everyday investors.” But they explained that achieving this goal with new rules that “preserve the recent expansion of market access” requires the SEC to scrap the current proposals “and ensure that any reforms to our equity markets are founded on a data-driven understanding of the current market structure.”

As someone who has spent my career in finance and feels passionately about expanding access to financial markets for minority investors, I wholeheartedly agree with the congressman. Federal regulators should pause and put forward new proposals that build on the progress we’ve made in recent years by making it even easier for new investors to participate in the market and create personal wealth.

The technological advances we’ve seen in recent years have unlocked financial opportunities for a new class of younger and more racially diverse investors. They now have the opportunity to create more wealth for their families, pursue dreams of a small business and enhance their personal financial security through investments. Federal regulators should embrace this change and avoid putting in place rules that harm everyday retail investors. Washington should abide by the adage, “If it ain’t broke, don’t fix it.” We should celebrate the fact that the profile of the average investor has changed. Federal regulatory policy should not undo this important progress.

Ralph Thomas served as CEO and executive director of the New Jersey Society of Certified Public Accountants for 23 years prior to his retirement on June 30.