wtf is a natural person?
As opposed to a "legal person" like a corporation.
SEC Modernizes the Accredited Investor Definition
151–160 of 258 posts
Re: SEC Modernizes the Accredited Investor Definition
#152I'm an accredited investor. I've had a series 7 license and was in a finance PHD program. I've had the chance to see a lot of investments that require you being an accredited investor. Almost all of them have had some highly problematic issues. Most of them have a outcomes where you can lose all of your money and there is NO WAY to get out of the investments. What I tell other people is run away from investments that…
The liquidity aspect is key. There is basically none with private investments. You can get in, but may not be able to get out for 5 or 10 years... or more likely, never. For this reason alone, the average person is better off with public markets.
Re: SEC Modernizes the Accredited Investor Definition
#153Earlier quoted context omitted.
It's a matter of principle though. You don't restrict the freedom of individuals to protect them from other individuals that are bad actors. You go hard and strong after the bad actors. What other examples of laws outside of finance can you cite where individuals are restricted in order to protect them from other bad actors? It's absurd and not in the scope of what government should be doing.
>What other examples of laws outside of finance can you cite where individuals are restricted in order to protect them from other bad actors? Pretty much any consumer safety or mandatory licensing law. Even something as simple as buying a beer - we insist that legal adults are not allowed to buy a beer until they are older. We insist that adults must be over 21 to buy a handgun in many states, or that (in other state…
Most of your examples are designed to prevent unqualified people from hurting others, the main exception being the regulated drugs one.
This raises the question of whether a similar system could exist for investments. Do you think there could be a "prescription" investment where you'd need a sign-off from someone with certain qualifications who'd consider your financial position and what you were planning to do?
Re: SEC Modernizes the Accredited Investor Definition
#154These 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…
There's a strong financial incentive for the market to engage in fraudulent activities against investors. And the smaller the investor, the greater then incentive. Public companies have regulations that help prevent such fraud by requiring things such as audits by third party accounting firms, and regulating how these audits may be performed. Such regulations came about specifically as the result of fraud committed b…
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Re: SEC Modernizes the Accredited Investor Definition
#155Earlier quoted context omitted.
> People working in the industry know that you just need a lawyer or CPA to sign off on that. In your experience how willing are CPAs or lawyers to do that for you? In theory they're putting their credentials on the line for you, so I imagine it's either hard to find ones that will do that or very expensive to the point where it eats into the investment return with the amounts of capital being invested below the accr…
lol maybe 10 years ago and briefly. There have been a SaaS services for this the whole decade, and that’s only because the issuer exemptions were expanded to even need a lawyer because an investor saying “yeah Im accredited” wasn't good enough for some securities issuance exemptions. You don't lie to the lawyer (or most lawyers), you show assets. Assets which so happen to have a value and are totally illiquid. You tr…
I understand who has the consequences here.
My curiosity is about that conversation with the lawyer when you say "I traded a single unit of something I created for $1 and I happen to have 2,000,000 more units." where something is cryptocurrency (what else could it be?).
Would most lawyers go "Yep, just another routine accredited investor check, $200 please."
Or would most say "I'm being asked to affirm this person has $1m in assets and in the off chance that somehow this is checked by someone I could be penalized because I didn't do my diligence to make sure this isn't just funny money".
Re: SEC Modernizes the Accredited Investor Definition
#156This is classic gatekeeping. You can bring all your money to a casino, buy lottery tickets, make bets on horses. But somehow investing in early stage startups is suddenly an issue the government wants to protect you against.
Re: SEC Modernizes the Accredited Investor Definition
#157Earlier quoted context omitted.
There's a strong financial incentive for the market to engage in fraudulent activities against investors. And the smaller the investor, the greater then incentive. Public companies have regulations that help prevent such fraud by requiring things such as audits by third party accounting firms, and regulating how these audits may be performed. Such regulations came about specifically as the result of fraud committed b…
Seems like there's at least one "third option". The rights of minority shareholders don't have to be as minimal as they are. How about "anyone who owns stock is entitled to look at the books?"
Shhhhhh.
"Specific statutes in the California Corporations Code provide shareholders the right to inspect bylaws, accounting books, records, minutes and financial statements. The California Corporations Code allows the court to enforce these rights."
Re: SEC Modernizes the Accredited Investor Definition
#158These 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…
I know several regular middle class people who became "accredited" investors by simply lying on the form. While I don't condone that, it seems like no one really verifies assets in most cases.
Re: SEC Modernizes the Accredited Investor Definition
#159Great, now that all the valuable companies have done their IPO and the stock market is about to collapse, let's allow the peasants to come in and buy all our bags of crap before they become worthless.
It's all for their own protection of course. We really care about the peasants. Especially when they bail us out.
Re: SEC Modernizes the Accredited Investor Definition
#160Earlier quoted context omitted.
> It's insanely paternalistic & economically destructive - a ghostly holdout from some bad experiences in another era, the 1930s, when the ranges of available information, experience, and alternative temptations were all tiny & quaint compared to the 2020s. Over the last 90 years we have repeatedly learned very difficult lessons about the individual and societal costs of unregulated securities markets and made change…
> Our securities markets work According to what standard? Is the fact that I can’t invest $5000 in my friend’s startup an example of our securities markets “working”? Not according to any rationally justifiable standard. Certainly the impulse to protect grandma’s life savings from predatory fraud is a good one. But the proper way to better society is through empowering individuals to make better decisions. An example…
> “Others might do a bad thing, therefore you should be banned from doing a good thing” is not a logically coherent standard — yet that is the essential argument of the SEC and it’s “accredited investor” protections.
No. That is not remotely close to summarizing the SEC’s stance on accredited investors or the regulations the SEC enforces to protect retail investors. The securities regulations are, at their core, a disclosure regime. They aren’t intended to police for bad investments and they aren’t intended to prevent you or I or anyone else from making stupid decisions with our money. They’re merely about how much information must be furnished to potential investors before they invest. That’s it.
If you want to sell securities to everyday folks, they have to be registered. Full stop. Any unregistered sale is an exemption to the rule but anyone can register their securities for sale and provide potential investors with a prospectus and some basic information about the investment.
Generally speaking the registration and disclosure requirements are eased or exempted for people with a higher income not because they’re smarter and can avoid bad investments or because they’re better situated financially to absorb the loss. It’s because they have the resources to do the diligence and hire people ask the questions and get the necessary information to make the investment. Think of it as outsourced compliance. Rather than the entity paying for the cost of registering the securities and everything that entails the investors pay for it up front.
And that makes sense. If I have a question about Apple’s prospectus I can’t ring Tim Cook and ask for more information. What you see in the disclosures is what you get. But if I’m one of the 35 unaccredited investors in my friend’s company and I have a question I can absolutely call the CEO and get the answers.
And now think about the middle ground: JFrog, for example, before they filed their S-1. If you or I invested $5,000 and we had a question about operations do you think we’d get answers? No way. If Elon Musk invested and he had the exact same question do you think he’d get answers? Of course.