Some financial myths never seem to die. One is the delusion that the markets are full of "sophisticated investors."

This week, the Municipal Securities Rulemaking Board, which helps regulate the sale of tax-free bonds, proposed a new definition of what makes a sophisticated investor. A "sophisticated municipal market professional" would be defined as an institutional client that "the [bond] dealer has a reasonable basis to believe is capable of evaluating investment risks and market value independently..." and "affirmatively...