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SEC Modernizes the Accredited Investor Definition

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Re: SEC Modernizes the Accredited Investor Definition

#241

Post by chii »

gojomo wrote: post #54
michaelbuckbee wrote: post #32

Earlier quoted context omitted.

This is a pretty clear Chesterton's Fence [1] example. The scams that occurred prior to enacting these standards were massive. If you want to look at a modern example of such things, consider the cryptocurrency ecosystem and the many scams that occurred [2] 1 - https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence 2 - https://twitter.com/patio11/status/1032024732214812673

Modern scams don't show the 'accredited investor' rules are helpful. These "are you rich enough?" limits, on just a few classes of potential investments, did not and can not provide any protection against rampant risks like: * Enron (an audited public company approved for widow-and-orphan investing) * Madoff * Fake-documentation or risk-oblivious home lending * At-home Forex or securities trading in arbitrarily exoti…

the accredited investor rules are not meant to reduce all risks - just risks associated with non-disclosures.

Things like enron cooking the books, or madoff ponzi schemes are going to happen regardless of the accredited investor certification.

But what you can't know is whether having early stage startup and other investments require accredited investor certification means fewer people get trapped into investments they don't fully understand. I think it does.

Re: SEC Modernizes the Accredited Investor Definition

#242

Post by colordrops »

bsder wrote: post #232
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.

> 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. That's fine. But you first up the enforcement and second decrease the qualifications. I can tell you from personal experience that the SEC has a lousy record of enforcement against even serial bad actors. And the civil system is even worse. 4 of 9 startups that I hav…

> THIS is the reality you are championing for. Just so you know.

I understand the current reality. I was in several startups myself, and got caught up in this sort of thing.

When I said:

> You go hard and strong after the bad actors

there is a lot wrapped up in that statement. Not just having more SEC involvement. More like doing whatever it takes, all the way up to refactoring our entire financial system and going after wall street and the federal reserve.

I understand that sounds unrealistic, but the financial class are mostly parasites IMHO, and will eventually kill the host if something is not done. It boils down to class warfare, which the accredited investor BS explicitly reflects.

Re: SEC Modernizes the Accredited Investor Definition

#243

Post by asdff »

bobthepanda wrote: post #49
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 peopl…

People in the 90s were doing the same to buy beanie babies. People will do dumb things with their money. That being said, I don't think things like pattern day trading bans have ever been beneficial to the retail investor. It just keeps poorfolk from engaging in strategies used by wealthier people regularly.

Re: SEC Modernizes the Accredited Investor Definition

#244

Post by bobwernstein »

vmception wrote: post #226
elamje wrote: post #224

Earlier quoted context omitted.

Good explanation of it. I’ve yet to find a single case this has actually happened for. I get the gut feeling that the SEC doesn’t have the audit capacity to focus on the likely smaller deals where non accredited people lie. Please share any cases you’ve found

Thats because you are looking for the wrong thing. Companies and individuals get fined and sanctioned for non-exempt offerings of securities all the time all day every day. Non-exempt means that the issuer either didn't bother to care, or tried to comply with a registration exemption but failed. One way of failing is the inclusion of non-accredited investors. Depending on the exemption being leveraged. No sanction wi…

''Companies and individuals get fined and sanctioned for non-exempt offerings of securities all the time all day every day.''

where are those published?

Re: SEC Modernizes the Accredited Investor Definition

#246

Post by say_it_as_it_is »

Note that the process of reforming equity fundraising began at least ten years ago as the JOBS Act was drafted. Powerful financial lobbying watered down provisions, such as the designation of accredited investor and anything else that would enable a viable crowdfunding marketplace to exist. After TEN YEARS, across several political administrations controlled by both political parties, this change finally takes a baby step forward. It's still not democratizing access to private investment. The reasons for this remain the same: those who control the flow of capital demand it.

Re: SEC Modernizes the Accredited Investor Definition

#247

Post by vmception »

bobwernstein wrote: post #244
vmception wrote: post #226

Earlier quoted context omitted.

Thats because you are looking for the wrong thing. Companies and individuals get fined and sanctioned for non-exempt offerings of securities all the time all day every day. Non-exempt means that the issuer either didn't bother to care, or tried to comply with a registration exemption but failed. One way of failing is the inclusion of non-accredited investors. Depending on the exemption being leveraged. No sanction wi…

''Companies and individuals get fined and sanctioned for non-exempt offerings of securities all the time all day every day.'' where are those published?

Some here

https://www.sec.gov/page/litigation

I dont think SEC reports all

All states have an equivalent agency

CFTC gets involved sometimes and there are some capital offerings and issuance solely under its purview

Re: SEC Modernizes the Accredited Investor Definition

#248

Post by bobwernstein »

vmception wrote: post #247
bobwernstein wrote: post #244

Earlier quoted context omitted.

''Companies and individuals get fined and sanctioned for non-exempt offerings of securities all the time all day every day.'' where are those published?

Some here https://www.sec.gov/page/litigation I dont think SEC reports all All states have an equivalent agency CFTC gets involved sometimes and there are some capital offerings and issuance solely under its purview

I checked that link but can't find a single one concerning non-accredited investors. Can you post one? I want to get familiar with this matter.

Re: SEC Modernizes the Accredited Investor Definition

#249

Post by gojomo »

chii wrote: post #241
gojomo wrote: post #54

Earlier quoted context omitted.

Modern scams don't show the 'accredited investor' rules are helpful. These "are you rich enough?" limits, on just a few classes of potential investments, did not and can not provide any protection against rampant risks like: * Enron (an audited public company approved for widow-and-orphan investing) * Madoff * Fake-documentation or risk-oblivious home lending * At-home Forex or securities trading in arbitrarily exoti…

the accredited investor rules are not meant to reduce all risks - just risks associated with non-disclosures. Things like enron cooking the books, or madoff ponzi schemes are going to happen regardless of the accredited investor certification. But what you can't know is whether having early stage startup and other investments require accredited investor certification means fewer people get trapped into investments th…

What makes you "think" that? A hunch? Blind trust in ~90-year-old regulatory structures?

How many people reviewed the Enron disclosures? How many amateur daytraders & Robinhood investors read all the disclosures of the "public" securities they hop into and out of?

Aren't all levels of investors leveraging the greater attention of a smaller group of experts? Couldn't some non-millionaires – there are a lot of them, with many diverse skills! – be the kind of highly-attentive 'leads' who help vet firms for larger networks?

Is an inherited-funds millionaire, no matter how dumb or lazy, more immune from the risks of non-disclosure than a young & ambitious non-millionaire? How about a non-millionaire with graduate degrees in business, finance, law? Why not test competence, not net worth?

Would you also only allow the high-net-worth to do other risky activities, like drive private cars, play contact sports, camp on public lands, visit the beaches?

How about raise children? There, a life is at stake. Do we dare let these gullible, barely-adult non-millionaires, the kind of rubes who would throw all their money away on unwise private investments if the SEC didn't save them, have children?

And if slick founders can easily fleece these childlike non-millionaires through deceptive promises, what chance do these wisdom-constrained individuals have against slick politicians? Is it really prudent to let non-millionaires vote?

Re: SEC Modernizes the Accredited Investor Definition

#250

Post by aaronblohowiak »

colordrops wrote: post #180
aaronblohowiak wrote: post #96

Earlier quoted context omitted.

> What other examples of laws outside of finance can you cite where individuals are restricted in order to protect them from other bad actors? Controlled substances (ie: prescriptions,)

That's not why drugs are illegal. In fact you'd be far more protected from bad actors if they were legalized.

You need an rx for many things that would be fine otc for paternalistic reasons, that have no “abuse” potential. My post was about rx requirements not prohibition of recreational drugs.
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