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SEC proposes changes to “accredited investor” definition

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Re: SEC proposes changes to “accredited investor” definition

#111

Post by octodog »

ibeckermayer wrote: post #108
gumby wrote: post #97

Earlier quoted context omitted.

> 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 som…

That's a nice idea. But here in the real world financial fraud happens and it is frequently not resolved by the courts and the justice system.

Re: SEC proposes changes to “accredited investor” definition

#112

Post by briandear »

DaiPlusPlus wrote: post #81
dragonwriter wrote: post #74

Earlier quoted context omitted.

> The people in Congress don’t vote anymore for what they personally think is right but what the party tells them to do. They don't vote any less for what they think is right, either. Political expediency has always been a major factor, even during the realignment when the national party may not have been as big of a factor (though it was always a big factor) in the expediency calculation.

> They don't vote any less for what they think is right, either I’d like to avoid the use of the all-encompassing “they” when referring to US politics. It’s demonstrable that one, specific, major political party lost all semblance of a moral compass (or even an ideological compass) in the past couple of decades and it would be an error of judgement to presume they vote for and support what they actually believe is mo…

Oh good grief. One party didn’t “lose its moral compass.” Chuck Schumer is just as likely to support a bad law as John Cornyn. And the facts support that time and time again. “Moral compass” is such a loaded term. Banning abortion could be seen as “moral” just as easily as passing stricter banking regulation. That’s the problem — morality has become so muddled as to have become a useless measure. To me, it’s immoral to want to take money from me and give it to some favored group. To others, it’s moral to take money from me and give it to some favored group. What we need is smaller, less intrusive government, then there is less opportunity to be bothered by the morality of laws — because there would be fewer of them and they would have a smaller scope.

Re: SEC proposes changes to “accredited investor” definition

#113

Post by briandear »

bsder wrote: post #62
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…

> The stated mission of the SEC is "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation." The problem with small investors is that it is really damn hard to bring a CEO doing obviously fraudulent things to heel. It takes a significant fraction of a million dollars to bring a successful lawsuit--and what you get in the end isn't worth much. The SEC needs to be much mor…

> it is really damn hard to bring a CEO doing obviously fraudulent things to heel.

If it’s “obviously” fraudulent, why isn’t law enforcement involved? No lawsuit required since fraud is a crime.

Re: SEC proposes changes to “accredited investor” definition

#114

Post by briandear »

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?

If the average person could bet their life savings on red at the Roulette table, what’s different about allowing them the freedom to bet on risky investments? At some point adults should be adults and be responsible for themselves. Of course fraud should remain illegal, but assuming fraud isn’t involved, why not let anyone invest in anything?

Re: SEC proposes changes to “accredited investor” definition

#115

Post by briandear »

kelnos wrote: post #75
kenneth wrote: post #64

Earlier quoted context omitted.

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.

I do generally agree with you that the accredited investor definition should just be scrapped entirely, but the problem with fraud is that you usually don't find out about it until your investment is gone, and prosecutions often aren't able to recover anywhere near enough to make the investors whole again. And even when they do, it can take months or years. Someone with a $20M net worth can deal with losing $1M. It s…

You should never invest capital you can’t afford to lose.

Re: SEC proposes changes to “accredited investor” definition

#116

Post by bsder »

briandear wrote: post #113
bsder wrote: post #62

Earlier quoted context omitted.

> The stated mission of the SEC is "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation." The problem with small investors is that it is really damn hard to bring a CEO doing obviously fraudulent things to heel. It takes a significant fraction of a million dollars to bring a successful lawsuit--and what you get in the end isn't worth much. The SEC needs to be much mor…

> it is really damn hard to bring a CEO doing obviously fraudulent things to heel. If it’s “obviously” fraudulent, why isn’t law enforcement involved? No lawsuit required since fraud is a crime.

They could. But the FBI, SEC and IRS probably won't move unless you present them with an absolute slam dunk worth $5 million or more in direct penalties. If you're below that range, you're probably going to have to file a civil lawsuit. And, after your win that, one of the TLA's might pay attention.

This is a problem if you genuinely want more small companies funded by more small investors.

If the SEC doesn't figure out how to police the $1-$5 million range of companies, all they are doing is creating a nice fertile ground for conmen.

Re: SEC proposes changes to “accredited investor” definition

#117

Post by JumpCrisscross »

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.

> Having more money doesn't make you less susceptible to fraud

Yes it does. If you’re investing $25k in a company, you can’t pay lawyers more than a pittance to review documents and do diligence. That makes you more susceptible to fraud.

Re: SEC proposes changes to “accredited investor” definition

#118

Post by ponsin »

One thing I didn't understand about hedge funds is why they limit themselves to only accepting large sums of money from individuals. That concept appeared a lot in the movie about Bernie Madoff. Is it harder to manage a hedge fund with more investors? Once you get the money from them shouldn't the hedge fund be able to use the money just the same as if it came from few rich people?

Re: SEC proposes changes to “accredited investor” definition

#119

Post by alasdair_ »

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…

As someone who has raised angel and VC money in the past, I find the accredited investor rules useful for the company as well as for protecting individuals.

Having a clear standard that I can point to to say “these investors are grown-ups that knew what they were investing in” helps minimize things like superfluous lawsuits from people that really shouldn’t have been risking their only savings in an angel investment.

I don’t want to dig deep into an angel’s personal finances to determine if they can really afford to invest or not based on savings and risk profile and having a legal bar an investor has to meet makes the process of raising money slightly less onerous.

Re: SEC proposes changes to “accredited investor” definition

#120

Post by alasdair_ »

ibeckermayer wrote: post #108
gumby wrote: post #97

Earlier quoted context omitted.

> 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 som…

> 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.

Non-accredited investors, by definition, don’t have a lot of money.

If that money is stolen from them via fraud, where does the money to fund the lawsuit come from?

What if the total potential judgement is less than the cost of the court case?

Regulations exist, in part, because legal remedies are incredibly inefficient.

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