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SEC Modernizes the Accredited Investor Definition

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Re: SEC Modernizes the Accredited Investor Definition

#11

Post by otoburb »

bluedevil2k wrote: post #8
throwawaygh wrote: post #3

The two big changes: 1. permitting natural persons who have "professional certifications" or "credentials issued by an accredited educational institution". 2. include as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund. Most of the other changes fill in gaps that shouldn't have existed: expanding the definition of spouse and adding orgs…

Do you think "credentials issued by an accredited educational institution" would include things like an MBA? Or even a BA in Business?

Some of the earlier proposals and discussions from public discourse included comments referring to credentials such as CPA, CFA, CMA, being a registered representative, MBA, CIMA, or possibly having been a broker, lawyer or accountant.[1][2]

But ultimately we'll need to wait for the final list.

[1] https://www.sec.gov/rules/concept/2019/33-10649.pdf

[2] https://www.sec.gov/rules/proposed/2019/33-10734.pdf

Re: SEC Modernizes the Accredited Investor Definition

#12

Post by CalChris »

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis.

VC follows a power law and the vast majority of these investments will fail.

Re: SEC Modernizes the Accredited Investor Definition

#13

Post by JumpCrisscross »

CalChris wrote: post #12

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis. VC follows a power…

> who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities

It looks like the current certifications are restricted to those of financial professionals [1] and employees of funds [2]. That doesn't strike me as nuts.

[1] holders in good standing of the Series 7, Series 65, and Series 82 licenses

[2] natural persons who are “knowledgeable employees” of the fund

Re: SEC Modernizes the Accredited Investor Definition

#14

Post by [deleted] »

CalChris wrote: post #12

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis. VC follows a power…

[deleted]

Re: SEC Modernizes the Accredited Investor Definition

#15

Post by nrmitchi »

CalChris wrote: post #12

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis. VC follows a power…

> relatively low traditional income requirements ($200k/yr)

$200k/year may be "relatively low" in certain areas, but it borderline unattainable in many parts of the country.

People can be smart, and perfectly capable of understanding the risks with offerings in their own industry, without making 200k/year. Don't automatically discredit people with airquotes based on their salary alone.

There are also many people who make more than $200k/year who are, quite frankly, not "financially sophisticated enough to take on the risk".

Re: SEC Modernizes the Accredited Investor Definition

#16

Post by tempsy »

They also eased risk disclosure requirements https://www.sec.gov/news/press-release/2020-192

It's honestly laughable that their top priorities in the height of what appears to be a massive stock bubble is weakening investor protections at a time when they should be strengthened

Re: SEC Modernizes the Accredited Investor Definition

#17

Post by CalChris »

JumpCrisscross wrote: post #13
CalChris wrote: post #12

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis. VC follows a power…

> who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities It looks like the current certifications are restricted to those of financial professionals [1] and employees of funds [2]. That doesn't strike me as nuts. [1] holders in good standing of the Series 7, Series 65, and Series 82 lic…

It says in conjunction which means that yeah, stock brokers can now invest. But it also said certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution. These educated folks don't necessarily need even a Series 7.

Yes, I would like to read Matt Levine rip this apart.

Re: SEC Modernizes the Accredited Investor Definition

#18

Post by JacobDotVI »

CalChris wrote: post #12

So these are 'smart' people who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities without the protection provided by normal regulatory disclosure filings. This strikes me as insanely stupid akin to the ownership society nonsense which precipitated the housing crisis. VC follows a power…

The 200k/yr also had a multi-year look back. So you weren’t accredited until year ~3 of making such a salary.

Re: SEC Modernizes the Accredited Investor Definition

#19

Post by chowells »

This is great for employees of private funds and other things like that. It makes no difference at all to the average person complaining about the accredited investor rules preventing them from investing in sure-fire wins.

It really doesn't matter how much of a genius you are at recognizing investment wins. If you can't give them enough cash to finance their operations for a significant period of time, the company isn't going to be interested in taking your money. If you can't meet the wealth guidelines, you're not gonna be able to give them enough money to be worth their time dealing with.

Re: SEC Modernizes the Accredited Investor Definition

#20

Post by JumpCrisscross »

CalChris wrote: post #17
JumpCrisscross wrote: post #13

Earlier quoted context omitted.

> who somehow can't meet the relatively low traditional income requirements ($200k/yr) but who are now assumed to be financially sophisticated enough to take on the risk of these securities It looks like the current certifications are restricted to those of financial professionals [1] and employees of funds [2]. That doesn't strike me as nuts. [1] holders in good standing of the Series 7, Series 65, and Series 82 lic…

It says in conjunction which means that yeah, stock brokers can now invest. But it also said certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution . These educated folks don't necessarily need even a Series 7. Yes, I would like to read Matt Levine rip this apart.

> certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution

After specifying that "holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons," the bullet point adds that the SEC chose this "approach [to provide] the Commission with flexibility to reevaluate or add certifications, designations, or credentials in the future."

So no, at this point, only holders in good standing of those licenses are included in this part of the amendment.

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