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SEC Modernizes the Accredited Investor Definition

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Re: SEC Modernizes the Accredited Investor Definition

#161

Post by bpt3 »

voxic11 wrote: post #126
bpt3 wrote: post #118

Earlier quoted context omitted.

What exactly is stopping you from investing $5000 in your friend's startup?

Presumably Rule 506(b) which prevents fundraising from nonaccredited investors. There is an exception for up to 35 non-accredited investors but taking money from even one non-accredited investor greatly increases the disclosure requirements on your startup. So the startup would essential need to do disclosure as though it were a public company. https://www.sec.gov/smallbusiness/exemptofferings/rule506b

Rule 506(b) doesn't prevent it entirely, and keep in mind that the vast majority of companies aren't venture backed startups, and I believe would be covered under Rule 504.

You absolutely don't need to do disclosure like a public company if you have non-accredited investors.

Re: SEC Modernizes the Accredited Investor Definition

#162

Post by bpt3 »

otoburb wrote: post #141
bpt3 wrote: post #118

Earlier quoted context omitted.

What exactly is stopping you from investing $5000 in your friend's startup?

To cross all the t's and dot all the i's, you might be able to join a friends-and-family round under Rule 504, but your founder friend should still do the due diligence to ensure the participating friends and family investors reside in states where such an offering is exempt from registration/qualification under state blue-sky laws[1]. IANAL. Hopefully your founder friend will have had a startup attorney to ask about…

Any founder who is looking to take funding from anyone should have a startup attorney to ask about this.

Re: SEC Modernizes the Accredited Investor Definition

#163

Post by renewiltord »

cryptica wrote: post #159

Great, 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.

The "peasants" don't have to buy anything, dude. I know friends with all their money in bonds, metals, and Vanguard. No one's making you go by TSLA 4500 calls expiring this Friday.

Re: SEC Modernizes the Accredited Investor Definition

#164

Post by bpt3 »

DetroitThrow wrote: post #140
bpt3 wrote: post #120

Earlier quoted context omitted.

Much of the losses in 2008 were caused by illegal and non-rule-following activity.

Importantly we also implemented several new schemes to ensure that we were better able to evaluate illegal and non-rule-following activities after 2008 as well.

Right, this is the sort of regulation that people are now complaining about in the securities market because a long time has passed since it was originally enacted.

Re: SEC Modernizes the Accredited Investor Definition

#165

Post by vmception »

ninetax wrote: post #155
vmception wrote: post #144

Earlier quoted context omitted.

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 ha…

the latter would only happen if dubious value propositions by poor/middle class people became too commonplace after they started complaining about losing their money and management in private securities offerings. the company will then double down on covering their ass by looking into who is making complaints.

if they start predictably acting like non-accredited investors after jumping through those hoops, then there will be more scrutiny.

right now not enough people that are actually poor jump through those hoops. there are a lot of people liquid with $25k-$100k or can get it, that don't make $200k/year or have $1mm in assets when not excluding their home. the wealth requirements also don't account for cost of living by area. Some of them jump through the hoops to get access to things they really should have access to. The rest don't and poorer people can't because the investment minimums so that nobody's time is wasted is too high.

Re: SEC Modernizes the Accredited Investor Definition

#166

Post by bpt3 »

baryphonic wrote: post #148
bpt3 wrote: post #120

Earlier quoted context omitted.

Much of the losses in 2008 were caused by illegal and non-rule-following activity.

Since there was so much illegal activity, who went to jail?

Here's the list: https://ig.ft.com/jailed-bankers/

Here's a good analysis of why more people didn't go to jail: https://www.theatlantic.com/magazine/archive/2015/09/how-wal...

Lack of successful prosecution doesn't mean that illegal activity didn't occur. Are you ticketed every time you drive over the speed limit? I'm not.

Re: SEC Modernizes the Accredited Investor Definition

#167

Post by gojomo »

alasdair_ wrote: post #103
colordrops wrote: post #80

Earlier 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…

But none of your examples use the reductionist & discriminatory "how big is your bank account" standard as a proxy for a person's responsibility.

What if you had to be rich - far beyond the sticker & insurance price - to buy a car? ("You're not a millionaire? We've decided you should only be allowed to take the bus.")

Rich to buy a beer? Rich to buy a gun?

Rich to buy a bunch of OTC medicines? (Poor people would still need a prescription - from a doctor, or perhaps, under the "rich makes smart" standard, just a rich sponsor.)

Rich to buy fireworks?

Rich to buy certain books, with dangerous knowledge? (Similar to how it is only by private investing that you get a full practical education in how such investments/firms work.)

Re: SEC Modernizes the Accredited Investor Definition

#168

Post by cryptica »

elamje wrote: post #149

My biggest problem with this is that I have had multiple opportunities as a young professional to invest in my friends’ small funds, only to be turned away at the last minute when they decided to only accept accredited investors. On the other hand, I could participate in sh*tcoin ICO’s, get rich quick “courses”, and become a real estate “investor” by attending presentations at a Holiday Inn conference room. The law a…

Of course, to people outside of the US, what was going on in the US was obvious. They should just get rid of these socialist laws which are supposedly designed to protect your comrades but which actually serve the interests of a small number of politically connected elite by hindering mobility... Let's face it, what you have in the US is textbook communism.

It's ironic that Russia today is more capitalist than the US... It's like both countries lost the cold war against each other.

Re: SEC Modernizes the Accredited Investor Definition

#169

Post by cryptica »

renewiltord wrote: post #163
cryptica wrote: post #159

Great, 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.

The "peasants" don't have to buy anything, dude. I know friends with all their money in bonds, metals, and Vanguard. No one's making you go by TSLA 4500 calls expiring this Friday.

They don't have to, but they will, now that we finally allow them... At this very convenient time.

Re: SEC Modernizes the Accredited Investor Definition

#170

Post by gojomo »

nradov wrote: post #158
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…

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.

Indeed, & that's one of the things fueling my righteous anger here.

Several now very-rich, even 'celebrity' tier investors have mentioned that they simply faked the accreditation at a crucial early stage.

Of course, there's survivorship bias in such stories. But I feel like a sucker for not doing that - and thus losing money in approved things like NASDAQ instead. Or being over-concentrated in my own risky projects – which no SEC rule can protect a person from! – where other private investments would've been usefully uncorrelated.

I could've survived a 100% loss in whatever dozen or two startups I might have taken a flyer in – but in fact, they wouldn't have all cratered, and even if they did I'd have had far more insight into investing, and a broader network, than otherwise. Instead, that valuable experience was reserved for the rich, and those willing to lie about their riches.

So who is this rule protecting, exactly?

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