The Securities and Exchange Commission is expected to soon begin allowing hedge funds and other private placement investments to begin advertising and otherwise promoting themselves to the general public. That means television commercials and gussied-up websites, not to mention cold calls and online marketing pitches, coming to your home. “Ms Olen, would you like to hear about an innovative investment strategy, formerly only known to the wealthiest of the wealthy … ?

This is not good news, even if you want a hedge-fund manager to invite you to a mass dinner of steak and stock tips. The veteran investor Henry Kaufman often has a snarky but accurate quote attributed to him: that there are two kinds of people who lose money: those who know nothing and those who know everything.

The two groups are now going to collide, and chances are, they’ll both lose money.

“If you throw open a poorly regulated market without adopting any additional protections, there will be lot of investors who lose their money as a result,” says Barbara Roper, head of investor protection for the Consumer Federation of America.

You have to wonder how this happens at all. After Occupy Wall Street, after the protests and the dead trees and speeches and song sacrificed to “Main Street” versus “Wall Street,” haven’t we at least reached a wary separation of the two? Tell that to Congress. This brave new world of hedge fund investing for the common man will come to us courtesy of a provision of last year’s Jumpstart Our Business Startups Act – aka the JOBS act. It’s one that apparently directs the SEC to write a rule allowing hedge funds to promote their services directly to the public, something that was previously banned since the Great Depression.

Aspects of the JOBS Act are widely unpopular among both investor and consumer protection advocates as well as at the SEC itself, with the result that the agency has been accused by Republicans in Congress of deliberately stalling on the rules-writing process. New SEC chair Mary Jo White came under questioning about the delays in implementing it during her recent confirmation hearings, and replied she would get on it ASAP.

So what’s the problem?

Occupy hedge funds?

It comes back to the whole issue of losing money. Hedge funds may seem glamorous and important, but they’re looking for new investors in part because they’re not delivering the best returns to the old ones. Hedge funds have not enjoyed much in the way of investment success in recent years. The S&P 500 was up 13.4% in 2012 and flat in 2011.

Hedge funds as a concentration of the most secretive, brilliant investing minds on Wall Street? The Hennessee Hedge Fund Indices claims gains of 6.99% in 2012 and a loss of 4.6% in 2011. The belly flop impacted the star managers as much as the unknowns; the Financial Times recently calculated that following the totality of tips offered up by powerful hedge-fund managers at last year’s powerhouse Ira Sohn investment conference would have netted an investor less profit than simply placing money in an index fund that follows the S&P 500 with no human meddling.

The hedge fund world delights in obscurantist speech that makes hot-shot traders look like cool-headed academics: a “pure” return is called “alpha,” and risk and volatility called “beta.” What happens: investors seeking alpha find themselves getting returns worse than beta. When they put the money in, they think they are getting the John Paulson who made successful bets on the subprime housing mess, and only after the fact, after years of standing by their genius, find themselves locked in with the John Paulson who is on the wrong side of a gamble in gold.

As a result, it’s getting harder for the $2.2tn, 9,911 fund-strong hedge fund industry to find enough customers willing to pay their high fees: that’s 2% for the privilege of asking them to manage your assets, and 20% of the profits they make for you. A quick call to any mutual fund’s 800 number will net a better deal, not to mention no lock-down periods should you want their money back. TrimTabs Investment Research reports hedge fund inflows fell in March from the month before, a contrast to the mutual fund industry, which saw increased inflows into stock-based mutual funds during the same period.

Uncle Joe’s money on Wall Street

It’s time to broaden the consumer base. More than eight hundred hedge funds closed for business in 2012, according to the industry analyst Hedge Fund Research, but 1,108 new entrants replaced them. Of course, just as with a hot downtown restaurant, Joe Schmoe is being invited to dine only after richer investors have long had their fill.

Despite their less than stellar performance, hedge funds continue to enjoy something of an inflated reputation among the greater public. Perhaps it is the lure of the forbidden fruit. In order to currently invest in a hedge fund, you need to be what’s called an accredited investor – earning at least $200,000 annually or holding a net worth, excluding your house of at least $1m. You also need access in the way of managers at the banks and brokerages pitching the funds, or at the funds themselves.

Direct marketing will allow the hedge funds to pitch their wares directly to the mass of accredited investor consumers. No longer will you need a personal connect to get in, you’ll just need wireless or cable connection.

But if you believe a big time hedge fund with big time profits is going to bother with the little guy … well, come talk to me. I’ve got a great investment for you.

Let me explain. The major players often have extremely high investment minimums. SAC Capital – you know, the one with the legendary gains where a number of insiders stand accused of insider trading by the Feds – won’t take anyone on for less than $25m. Six-figure sums count as chump change in this world.

Giving Main Street the hard sell

Think about it for a minute. Retail, frankly, is hard work. People call up and ask questions. They’ll make you crazy in return for their precious pennies, something any teen folding sweaters at the local Gap can attest. Why would you want to deal with thousands of ma and pa Schwab accounts if half a dozen multi-million dollar institutional investors are begging for a meeting? Answer: you won’t.

“The people who are going to be taking advantage of these rules on marketing to the public will be people who can’t raise money by other means,” Roper claims. “If you can raise capital without going to advertising, you will.”

Among those who say they plan to take advantage of the new marketing opportunities as they arise is Anthony Scaramucci, the publicity seeking promoter and founder of SkyBridge Capital and the what-happens-in-Vegas-stays-in-Vegas SALT conference.

SkyBridge’s main offering requires a mere $25,000 – that’s barely tech-IPO-bubble money! – to get started and is marketed via brokerage houses including Merrill Lynch. The New York Times reports that the fund – the one that’s open to all those small investors – made gains of more than 20% in 2012 – but nonetheless has not done as well as the S&P 500 over the past decade.

Scaramucci told The Wall Street Journal this week he plans “to hit every medium that I can possibly hit.”

Think of it like pharmaceutical advertising, but instead of asking their doctors for Sonesta so they can doze off at night, Scaramucci is hoping CNBC viewers will turn up in the offices of their advisers seeking SkyBridge for portfolio enhancement.

Consumer watchdogs like Roper say they would like to see more protections for the public put in place, including additional steps to verify whether someone seeking to invest in hedge funds is truly accredited, or simply someone claiming such status. In the meantime, she says, “Investors should be highly skeptical of this market.

Then Roper sighs and adds, “But when have investors been highly skeptical of anything?”

Ain’t that the truth.