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SEC proposes changes to “accredited investor” definition

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Re: SEC proposes changes to “accredited investor” definition

#131

Post by say_it_as_it_is »

chillacy wrote: post #93
say_it_as_it_is wrote: post #85

The people who invested in Bernie Madoff funds were accredited. They believed they ought not ask questions and rock the boat. Trump University also had accredited investors. Softbank has accredited investors. It seems that being an accredited investor isn't protecting anyone from fraud.

Careful not to equate the presence of false negatives with the absence of true positives. Just because there are accredited investors who were tricked doesn’t mean that there wouldn’t be even more unaccredited investors who could have been tricked.

Of course there will be more tricked unaccredited investors because there will be more of them and government can't guide the hand. My point is that the accreditation rule is moot, regardless of income level.

Re: SEC proposes changes to “accredited investor” definition

#132

Post by say_it_as_it_is »

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.

Accredited investors are not better informed, more intelligent, nor disciplined. They just have more income. People make mistakes by assuming that one's status implies superior capabilities.

Re: SEC proposes changes to “accredited investor” definition

#133

Post by [deleted] »

ponsin wrote: post #118

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?

[deleted]

Re: SEC proposes changes to “accredited investor” definition

#135

Post by dragonwriter »

kyrieeschaton wrote: post #82
dragonwriter wrote: post #66

Earlier quoted context omitted.

> They do though; they have incredibly wide discretion and things like insider trading effectively exist only via SEC regulation. No, insider trading is the subject of laws passed by Congress; at a minimum, the Insider Trading Sanctions Act of 1984 and Insider Trading and Securities Exchange Act of 1988. And those laws are where the SEC enforcement powers over insider trading come from.

That's true to a point, but neither of those pieces of legislation actually define "insider trading" (although they do establish penalties for it). The power is more or less delegated to the SEC. There have been recent attempts to codify their present interpretation in statutory law. https://www.natlawreview.com/article/house-passes-proposed-l... Congress in general gives extremely wide power to particular administra…

> That's true to a point, but neither of those pieces of legislation actually define "insider trading"

That's true in the narrow sense that they don't have a definitions section with the term “insider trading” and a definition. They both use “insider trading” in their titles and internal headings of the code sections they add, and specify the covered behavior (which differs slightly between the two) in the body, “purchasing or selling a security while in possession of material, nonpublic information” (15 USC 78t-1) and “purchasing or selling a security or security-based swap agreement while in possession of material, nonpublic information, or...communicating such information in connection with, a transaction on or through the facilities of a national securities exchange or from or through a broker or dealer, and which is not part of a public offering by an issuer of securities other than standardized options or security futures products” (15 USC 78u-1.)

While Congress did give the SEC the ability to set the rules around insider trading, it didn't give the SEC a blank check which the SEC used to pull the idea of insider trading and regulating it out of thin air.

Re: SEC proposes changes to “accredited investor” definition

#136

Post by ativzzz »

nicd wrote: post #98
ativzzz wrote: post #88

Earlier quoted context omitted.

It sounds then, instead of accredited investors, we need an accredited capital investment designation. Allow anyone to invest, but require those who would seek investment from anyone to be under more scrutiny. Of course, this is only if the one seeking investment choose to do so.

Isn't this just called a "public company"? (Not sure if your comment was tongue-in-cheek. If not, I'm genuinely unclear how this is different from the current situation.)

Hahaha yea you're right, looks like I invented public companies a few hundred years after other people.

Re: SEC proposes changes to “accredited investor” definition

#137

Post by chachachoney »

toast0 wrote: post #124
ibeckermayer wrote: post #108

Earlier quoted context omitted.

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…

> I shouldn't be allowed to invest my money how I see fit. To my knowledge, the investees only need to ask you if you're an accredited investor, and tell you what that means. They don't need to actually verify that you meet the requirements. If you'ld like to invest in shady things, go right ahead.

Verification is necessary. Have you managed to invest in an endeavor which requires accredited investors while not actually meeting requirements yourself?

Re: SEC proposes changes to “accredited investor” definition

#138

Post by kenneth »

chachachoney wrote: post #137
toast0 wrote: post #124

Earlier quoted context omitted.

> I shouldn't be allowed to invest my money how I see fit. To my knowledge, the investees only need to ask you if you're an accredited investor, and tell you what that means. They don't need to actually verify that you meet the requirements. If you'ld like to invest in shady things, go right ahead.

Verification is necessary. Have you managed to invest in an endeavor which requires accredited investors while not actually meeting requirements yourself?

This is false. Most offerings are done under 506b which only requires a self-declaration by the investor that he is accredited.

Re: SEC proposes changes to “accredited investor” definition

#139

Post by bsder »

qtplatypus wrote: post #128
briandear wrote: post #113

Earlier quoted context omitted.

> 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.

Because "obvious" might not rise to the level of "beyond reasonable doubt".

Monetary penalty cases generally are "preponderance of the evidence".

"Beyond reasonable doubt" is generally only when jail is involved.

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