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SEC Modernizes the Accredited Investor Definition

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Re: SEC Modernizes the Accredited Investor Definition

#41

Post by throwaway713 »

airstrike wrote: post #37
tboyd47 wrote: post #22

The accredited investor restriction on private equity seems like the most anti-free-market law I've ever heard of. You're not allowed to put your own money into a business unless the government deems you Smart Enough (c) (tm) to do so. If the vast majority of citizens here are not smart enough to invest our own money, then what is all the higher education for? This change sounds like a good one but there's not enough…

> then what is all the higher education for? How exactly does a PhD in Biology help you understand investments?

Because intelligence is general and correlates well across fields, and intelligence has a loose causal link with a PhD in biology. So I wouldn’t say it "helps" with investment per se but there is a connection there.

Re: SEC Modernizes the Accredited Investor Definition

#42

Post by paxys »

tboyd47 wrote: post #22

The accredited investor restriction on private equity seems like the most anti-free-market law I've ever heard of. You're not allowed to put your own money into a business unless the government deems you Smart Enough (c) (tm) to do so. If the vast majority of citizens here are not smart enough to invest our own money, then what is all the higher education for? This change sounds like a good one but there's not enough…

Every SEC regulation and every financial law is anti-free-market, but that doesn't mean it isn't necessary.

Re: SEC Modernizes the Accredited Investor Definition

#43

Post by dralley »

throwaway713 wrote: post #41
airstrike wrote: post #37

Earlier quoted context omitted.

> then what is all the higher education for? How exactly does a PhD in Biology help you understand investments?

Because intelligence is general and correlates well across fields, and intelligence has a loose causal link with a PhD in biology. So I wouldn’t say it "helps" with investment per se but there is a connection there.

Ben Carson.

Re: SEC Modernizes the Accredited Investor Definition

#44

Post by throwaway713 »

dralley wrote: post #43
throwaway713 wrote: post #41

Earlier quoted context omitted.

Because intelligence is general and correlates well across fields, and intelligence has a loose causal link with a PhD in biology. So I wouldn’t say it "helps" with investment per se but there is a connection there.

Ben Carson.

One counterexample doesn’t make a point. I could list many people who are simultaneous experts in multiple fields and it wouldn’t help my argument either.

Re: SEC Modernizes the Accredited Investor Definition

#45

Post by charliemil4 »

tboyd47 wrote: post #22

The accredited investor restriction on private equity seems like the most anti-free-market law I've ever heard of. You're not allowed to put your own money into a business unless the government deems you Smart Enough (c) (tm) to do so. If the vast majority of citizens here are not smart enough to invest our own money, then what is all the higher education for? This change sounds like a good one but there's not enough…

No the real injustice is $25,000 for FINRA day trading / margin accounts.

Recent insane volatility could allow you trade from a couple thousand up to 25k in a few weeks - BUT you will most likely run out of day trades before that happens.

It's highly annoying.

Re: SEC Modernizes the Accredited Investor Definition

#46

Post by gojomo »

Lazare wrote: post #10
bluedevil2k wrote: post #8

Earlier quoted context omitted.

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

In theory, the SEC could decide to count those. In practice, that's basically unthinkable.

It's been discussed, so it's definitely thinkable.

And if getting an accredited-institution MBA, for tuition payments of anywhere from $22K to $200K, after about 17 years of other education (K-12, undergrad) isn't enough for someone to protect their own wealth from scams, what's the point of all that credentialing, anyway?

Re: SEC Modernizes the Accredited Investor Definition

#47

Post by _jal »

edoceo wrote: post #33
bluedevil2k wrote: post #8

Earlier quoted context omitted.

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

I foresee questionable institutions basically selling these creds to eager startup personality types

Of course, it happens any time you create magic status differentiators.

As just one example, stories pop up every few years about sheriff's offices selling 'honorary deputy' or similar status to rich people. I guess sometimes people buy them as symbols, but more frequently for the concealed-carry rights.

Re: SEC Modernizes the Accredited Investor Definition

#49

Post by bobthepanda »

gojomo wrote: post #36

These are good steps, but abolishing all wealth-tests entirely would still be better. There's no wealth-test that prevents a person from losing all their money in highly-leveraged investments - from real-estate to fancy public-market securities. (Over-leveraging into real estate is practically encouraged by public policy.) There's no wealth test against putting all one's cash into gambling, which can be arbitrarily w…

How many of those are capable of creating systemic financial risk, though?

People in the '20s were literally mortgaging their house and car to buy stocks on margin en masse because they took in advertising and word of mouth that told them it was a good idea. You could theoretically also do that at a casino, but practically speaking that's not a big problem.

Look at the crypto hype-train that got latched onto by people who didn't do their homework on crypto, or the craziness of WSB on reddit. We are still capable of letting that happen today.

Re: SEC Modernizes the Accredited Investor Definition

#50

Post by tptacek »

gojomo wrote: post #36

These are good steps, but abolishing all wealth-tests entirely would still be better. There's no wealth-test that prevents a person from losing all their money in highly-leveraged investments - from real-estate to fancy public-market securities. (Over-leveraging into real estate is practically encouraged by public policy.) There's no wealth test against putting all one's cash into gambling, which can be arbitrarily w…

Is there a variant of this framing that doesn't also argue against all securities regulation and a return to the status quo ante of the Great Depression? Because the Accredited Investor standard essentially bypasses securities disclosure laws. Without it, every company would obtain the benefits of being public company, with none of the associated obligations.
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