sort of... the 1000 investor limit was actually doubling the prior limit
the friction that the whole industry and the SEC pushes and pulls on is that nobody wants to go public because it's needlessly expensive to be a public company, companies would otherwise go public
basically, one publicly traded company does something egregiously bad, the SEC mandates a new expensive disclosure that requires a completely new operating style, less companies go public
the SEC's mission statement is a dual mandate: provide for fairer securities markets (via transparency mandates), and the second one is facilitate capital formation
so when the goal of providing for fairer markets is hampering people raising and accessing capital at all, then they help on that front
in this case, as people avoided going public, they would run into the number of investor limits and do suboptimal things because they couldn't raise more capital. so the limit went up to what it is
now, with that foundation in mind, your main point isn't close to what's happening "if a company is big enough it is important to reel it in a bit or else shenanigans happen", the SEC doesn't "reel in big companies". it mandates transparency in public companies, number of investors in private companies, and regulates details of certain transactions, that's it. you can be any size. they don't judge the merit of an investment (outside of some ETFs, since they also regulate fund advisors and ETFs just happen to be publicly traded funds), the SEC's focus is that there's enough information for an investor to judge the merit of a publicly traded investment