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SEC Modernizes the Accredited Investor Definition

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Re: SEC Modernizes the Accredited Investor Definition

#251

Post by vmception »

bobwernstein wrote: post #248
vmception wrote: post #247

Earlier quoted context omitted.

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.

As I detailed to the other person I was replying to, you won't find that. Try to re-read what I wrote.

If you are looking for that you are looking for the wrong thing. If you are on the fence about trying to qualify for a private investment because "law" its not your problem.

But if you are issuing an investment, it definitely is your problem.

Re: SEC Modernizes the Accredited Investor Definition

#252

Post by vmception »

hinkley wrote: post #233
vmception wrote: post #199

Earlier quoted context omitted.

> I’ve read about several people that weren’t accredited checking the box anyways, and no enforcement actually happens That's because it's not a prohibition on individuals as it wouldn't be constitutional. It is a prohibition on issuers, who can face civil and criminal sanctions while also having the entire offering rescinded retroactively. The government effectively achieves what they were going for either way. (A s…

What happens when a VC does their due diligence in a later investment, sees you in the mix, and bails? I’m fairly sure a place I worked at had this problem, and it held up funding for a long time.

A VC will want to completely restructure a non-compliant offering and may bail because of that.

A VC won't bail from a compliant offering because they checked people on the cap table that said they were accredited at the time, they will bail because there are a lot of people on the cap table to begin with.

Re: SEC Modernizes the Accredited Investor Definition

#253

Post by nullc »

chrisco255 wrote: post #69
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

Right, but it's not the 1920s any more. We live in this highly connected, information rich, rapidly changing world, that is fundamentally different than the 1920s in many ways. The general public is far more savvy about investments, risks, and bubbles in general than they were in the past. Today, private equity tends to capture almost all of the value before a company goes public. The crazy thing is that a foreign ci…

The cryptocurrency ecosystem broadly demonstrates otherwise: its full of outright scams operating a billion dollar scale.

Re: SEC Modernizes the Accredited Investor Definition

#254

Post by bobwernstein »

vmception wrote: post #251
bobwernstein wrote: post #248

Earlier quoted context omitted.

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.

As I detailed to the other person I was replying to, you won't find that. Try to re-read what I wrote. If you are looking for that you are looking for the wrong thing. If you are on the fence about trying to qualify for a private investment because "law" its not your problem. But if you are issuing an investment, it definitely is your problem.

I understand but then show me an example it has become a problem for those that issuid an investment and accepted a non accredited person.

Re: SEC Modernizes the Accredited Investor Definition

#255

Post by vmception »

bobwernstein wrote: post #254
vmception wrote: post #251

Earlier quoted context omitted.

As I detailed to the other person I was replying to, you won't find that. Try to re-read what I wrote. If you are looking for that you are looking for the wrong thing. If you are on the fence about trying to qualify for a private investment because "law" its not your problem. But if you are issuing an investment, it definitely is your problem.

I understand but then show me an example it has become a problem for those that issuid an investment and accepted a non accredited person.

A sanction from the regulator will say that the issuer "sold to investors without registering the security with the regulatory body" or "without an applicable exemption", because the issuer tried to rely on an exemption but the regulatory disagreed. Not all the reasons that the regulator disagreed will be stated.

Sorry man, not everything that occurs and why it occurs is on Google for your independent review. You just have to talk to people, and lawyers, and come to an average-right conclusion.

Maybe there is some blog somewhere about someone talking about their fine from the SEC or a case study, but its unlikely because people don't want to out themselves like that, or typically settlements (in general, not necessarily with regulator) bar people from talking about them.

Re: SEC Modernizes the Accredited Investor Definition

#256

Post by bobwernstein »

vmception wrote: post #255
bobwernstein wrote: post #254

Earlier quoted context omitted.

I understand but then show me an example it has become a problem for those that issuid an investment and accepted a non accredited person.

A sanction from the regulator will say that the issuer "sold to investors without registering the security with the regulatory body" or "without an applicable exemption", because the issuer tried to rely on an exemption but the regulatory disagreed. Not all the reasons that the regulator disagreed will be stated. Sorry man, not everything that occurs and why it occurs is on Google for your independent review. You jus…

"sold to investors without registering the security with the regulatory body" I knew you would say that, because there are countless judgements against companies to be easily found with that exact scenario. That's actually not the same situation as finding out a non accredited individual was allowed to purchase a security in a private offering. And "without an applicable exemption" is too vague and can mean anything. No way to know.

Re: SEC Modernizes the Accredited Investor Definition

#257

Post by tathougies »

refurb wrote: post #191
tathougies wrote: post #187

Earlier quoted context omitted.

No it doesn't really. People should be allowed to fail. The response when someone loses all their money due to a business failing should be to have a social safety net, not to prevent them from ever having been able to invest their money in the first place.

Wait what? You're arguing we should have a social safety net so when some blue collar worker loses 100% of their retirement savings because they invested in a scam start-up, they're covered?

Yes. That's right. Part of living in a free market state is allowing the market to choose. Part of living in a civilized country is ensuring that there are safety nets available to those who the market fails to support.

The market operates efficiently when every entity involved can have net worth of any amount, including negative. Unfortunately, human life requires a particular amount of wealth to survive. You cannot have a pure free market system without there being some left out. The purpose of government is to protect rights to life, liberty, and property. That means providing some support when someone's wealth is so low that they cannot sustain their life.

This should be implemented in such a way as to affect the market least. Milton Friedman's negative income tax would be one possibility, but there are others as well.

In any case, the market should be free to operate as if the person could reasonably be expected to have nothing.

Re: SEC Modernizes the Accredited Investor Definition

#258

Post by bobthepanda »

asdff wrote: post #243
bobthepanda wrote: post #49

Earlier quoted context omitted.

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.

People will do dumb things with their money, but the point of the regulation is to increase frictions on lots of people doing dumb things with their money at the same time. "Beneficial to the retail investor" has nothing to do with it.

If one person can't pay their home loan for the month that's the borrower's problem. If millions of people can't pay their home loan for the month that's the bank's problem, and generally speaking that's enough to start bank runs.

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