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SEC proposes changes to “accredited investor” definition

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Re: SEC proposes changes to “accredited investor” definition

#101

Post by mbesto »

SomewhatLikely wrote: post #100
gruez wrote: post #22

Earlier quoted context omitted.

>This is supposed to be protecting unsophisticated investors, but most of the investments prevented here are equity investments in small businesses. While at the same time anybody is allowed to buy TVIX, a 2x leveraged VIX ETF, which is basically gambling. My understanding is that it's supposed to protect investor from fraud (eg. along the lines of ICOs), not necessarily from risky/volatile investments.

Having more money doesn't make you less susceptible to fraud, but does make you less susceptible to ruin from big losses.

Source for that? I think the general idea is not whether someone is susceptible to fraud, but rather higher likelihood that you have experience with making investments.

How much you wanna bet a white collar worker making $200k/year has made more investment-based decisions in their life than a a blue collar worker making $20/hr?

I don't necessarily agree with the tenants of the idea of an accredited investor, but it's definitely a way to parse out a large chunk of the population unexperienced with investing.

Re: SEC proposes changes to “accredited investor” definition

#102

Post by mbesto »

tptacek wrote: post #19
travisoneill1 wrote: post #3

The whole thing should be scrapped. This is supposed to be protecting unsophisticated investors, but most of the investments prevented here are equity investments in small businesses. While at the same time anybody is allowed to buy TVIX, a 2x leveraged VIX ETF, which is basically gambling.

Doesn't accreditation largely influence how securities are marketed? Isn't the liability issue with accreditation on the security seller, and not on the buyer? Why would we want more shady investments marketed to people, even if some what's marketed today turns out to be shady?

As someone noted above, opening up accreditation to the whole population will do nothing to give those people access to the top performing investment vehicles, because the top performing investment vehicles are already getting their money from investors that they choose. So, all this will do is create more shady investment vehicles and those that can't afford to play with the bigger investments will continue to be sold on worse performing investment vehicles.

Re: SEC proposes changes to “accredited investor” definition

#103

Post by crooked-v »

alexmingoia wrote: post #92

The SEC has no way of knowing whether someone understands the risks of investing or not. If the reasoning is to protect ignorant investors and prevent fraud, it would be more effective and equatable to have a test/certification to be a qualified/investor, rather than banning large swaths of the population from investing. The current SEC rules are inherently discriminatory whereas the law should treat people equally.

From my experience working for a company in the real estate investment industry, the biggest gap in investor understanding is in risk vs projected return rate. Almost everyone including accredited investors gravitate towards anything with the highest potential return rate, even when there's great big up-front warnings about a given investment having X, Y, and Z risk factors.

With that in mind, even just forcing investors to pass a simple test about risk in different areas of investment (bonds, index funds, major real estate types, etc) would go a long way.

Re: SEC proposes changes to “accredited investor” definition

#104

Post by nradov »

kenneth wrote: post #20

Welcome changes to the accredited investor rules. Of course, would love to see them go even further and let just anyone invest — but this is already a step in the right direction. In all my dealings with the SEC (from working at multiple regulated investment platforms, AngelList and Republic, and now as a VC), it's become clear to me that they're extremely pragmatic and want to support innovation and create a level p…

Anyone already can invest through the simple expedient of lying about their assets and income. I know people who did this in order to invest in pre-IPO stock. Some financial services companies do minimal verification, and even if an unaccredited investor gets caught there's no real punishment.

(I am not recommending breaking the law.)

Re: SEC proposes changes to “accredited investor” definition

#105

Post by lazyasciiart »

dragonwriter wrote: post #59
Ididntdothis wrote: post #55

Earlier quoted context omitted.

I think a lot of weirdness in US regulation is because of Congress having lost the ability to make clear headed laws. There is so much friction in the partisan fights that they don’t have time and energy to write clear laws that make sense.

> ...Congress having lost the ability to make clear headed laws. When do you imagine they had such ability, and does much of th Byzantine nature of the securities laws really post-date that period? > There is so much friction in the partisan fights. No more than usual, except in the sense that because of the partisan realignment (or two overlapping realignments, one stemming from the New Deal itself, the other from J…

> No more than usual

Is that true? Is there a similar period in history where the Senate simply didn't hear the bills being passed by the House?

Re: SEC proposes changes to “accredited investor” definition

#106

Post by lazyasciiart »

kenneth wrote: post #64
gist wrote: post #60

Earlier quoted context omitted.

> Would love to see them go even further and let just anyone invest Very broad statement. 'Anyone' in 'any' amount? Surely you are not advocating that. Are you? In what way do you think the average person 'anyone' knows enough to essentially bet on a typical startup (called it 'gambling')? So you have a typical person living paycheck to paycheck but yes let them put whatever savings they might have into a startup?

Actually, I am. I don't believe that restrictions on private investments make sense. If anything, they perpetuate the "rich get richer, poor get poorer" problem. Unaccredited investors are kept out of great potential wealth creation. The problem is not bad investments, it's fraudulent ones. Fraud is still illegal even if you kill the accredited investors restrictions.

"The law, in its majestic equality, allows the rich as well as the poor to use their resources to bring a fraudulent CEO to justice"

Re: SEC proposes changes to “accredited investor” definition

#107

Post by jrs95 »

gumby wrote: post #97
kenneth wrote: post #20

Welcome changes to the accredited investor rules. Of course, would love to see them go even further and let just anyone invest — but this is already a step in the right direction. In all my dealings with the SEC (from working at multiple regulated investment platforms, AngelList and Republic, and now as a VC), it's become clear to me that they're extremely pragmatic and want to support innovation and create a level p…

> Of course, would love to see them go even further and let just anyone invest Are you aware of the history of the accredited investor rules? When just anyone could invest there was too much opportunity for swindlers .. a problem that goes back the Mississippi company back in 1719. Televangelists defrauding poor people is bad enough; we don’t need wall atreet bucket shops doing the same.

If anyone in power actually gave a shit about that why do we still have lotteries and casinos?

Re: SEC proposes changes to “accredited investor” definition

#108

Post by ibeckermayer »

gumby wrote: post #97
kenneth wrote: post #20

Welcome changes to the accredited investor rules. Of course, would love to see them go even further and let just anyone invest — but this is already a step in the right direction. In all my dealings with the SEC (from working at multiple regulated investment platforms, AngelList and Republic, and now as a VC), it's become clear to me that they're extremely pragmatic and want to support innovation and create a level p…

> Of course, would love to see them go even further and let just anyone invest Are you aware of the history of the accredited investor rules? When just anyone could invest there was too much opportunity for swindlers .. a problem that goes back the Mississippi company back in 1719. Televangelists defrauding poor people is bad enough; we don’t need wall atreet bucket shops doing the same.

Fraud is already illegal, and if it's happening then the defrauded parties should take the swindlers to court and prove it, and the justice system should punish them.

The fact that some people might get swindled is not an argument for why I shouldn't be allowed to invest my money how I see fit. Just like the the fact that somebody might sell a defective toothbrush doesn't justify forcing me to get the approval of some bureaucrat in order to buy one.

Re: SEC proposes changes to “accredited investor” definition

#109

Post by lazyasciiart »

nullc wrote: post #31
imeron wrote: post #9

Earlier quoted context omitted.

Or any of the weird coin offerings. Which - if you believe in the thing not being a scam - is essentially a way of financing a company. Just like buying an investment in a small business.

Woah watch out there. I have never seen a 'coin offering' that was remotely like buying an investment in a business, certainly not "just like". Instead, they have mountains of fine print that with extraordinary care make sure the recipient has absolutely no property right in the business, no claim to any title, no voting rights, usually no rights to share in profits, etc. If you wanted to liken them to something offl…

They seem most similar to kickstarter, with a theoretically higher imaginary upside.

Re: SEC proposes changes to “accredited investor” definition

#110

Post by g10r »

gist wrote: post #60
kenneth wrote: post #20

Welcome changes to the accredited investor rules. Of course, would love to see them go even further and let just anyone invest — but this is already a step in the right direction. In all my dealings with the SEC (from working at multiple regulated investment platforms, AngelList and Republic, and now as a VC), it's become clear to me that they're extremely pragmatic and want to support innovation and create a level p…

> Would love to see them go even further and let just anyone invest Very broad statement. 'Anyone' in 'any' amount? Surely you are not advocating that. Are you? In what way do you think the average person 'anyone' knows enough to essentially bet on a typical startup (called it 'gambling')? So you have a typical person living paycheck to paycheck but yes let them put whatever savings they might have into a startup?

For the most part, the government shouldn't get to tell people what they can or can not do with their money. We don't currently stop people from going to vegas, buying lotto tickets, buying expensive cars, clothes, buying education, etc.

Said another way, 'anyone' can invest 'any' amount in a public stock today and lose it all tomorrow. Heck people were even suckered into mortgages they couldn't afford by our trusty banks.

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