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The SEC Just Voted To Lift The Ban On General Solicitation

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Re: The SEC Just Voted To Lift The Ban On General Solicitation

#41

Post by qdog »

diminoten wrote: post #32
wissler wrote: post #29

Earlier quoted context omitted.

"This to prevent exploitation of unsophisticated investors." Sure it is.

Can you make an actual argument, please? I'm interested in hearing what you have to say if you've got something to say other than snarky one-liners.

He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad.

However, if you are someone who isn't an arbitrager(investor isn't the right term) in their daily job, the pressure to join the tulip buyers is a lot heavier than the available knowledge. The root of this problem is lies, because the tulip sellers are always going to give false data to encourage people to buy, and the amount of money changing hands will always attract a lot of unethical people. The libertarian mantra is that things will balance out via crowd sourcing (is it a market investing in a company that doesn't sell products yet? I argue not), yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#42

Post by jmj42 »

ChuckMcM wrote: post #8

I think this is a mixed blessing. I agree that the ban has been a hindrance on people trying to find investors but lifting it may not be the best solution. If you look at the way YC demo day works, its a pretty reasonable way for potential investors to find startups which are compatible with their investment goals. I think this addresses the challenge of the general solicitation rule (finding the startups) without th…

> I think this addresses the challenge of the general solicitation rule (finding the startups) without the negative of creating a bunch of unvetted startups advertising for dollars.

Not really. We, here on HN, tend to frame things around tech startups, but there's a larger world out there that incubators don't (and often can't) address. Consider this (real life) example:

Recently a local pub came up for sale. The asking price was $200,000. The purchase would include all current equipment and supplies, existing vendor contracts (subject to state transferability rules on the alcohol contracts), and local liquor license (the state license isn't transferable). It also included the building which housed 3 occupied (at the time) apartments.

The question, of course, is how to raise the $200K. Standard business loans were out (not an established business). There's SBA, but the loan amount we were looking for was a bit high for SBA. Friends and family, of course, but we wouldn't even come close.

In the end, we had to pass (though funding was only a part of the decision to pass). Here's kicker: If we could have spread the net wider, we may have had a chance to raise the money (with less effort), and been able to go ahead with the purchase.

While this is one story, I see these kinds of things al the time. A few years back, a founder looking to start a paintball facility got nailed by this (he was advertising the investment opportunity). It ended up shutting down the project.

The point is, outside of the technology world, getting investment funding for small businesses is very hard. This rule change makes it much easier.

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#43

Post by gbelote »

rdl wrote: post #28

How does this affect state securities ("blue sky") laws? It doesn't do a lot of good to be allowed to solicit under federal law if you have to comply with 50 (well, some are null, but still close) different regulations. IIRC NY and CA are particularly tough.

You don't need to comply with the blue sky law investor limits. And the 500 investor limit has been increased to 2000, which doesn't include non-accredited investors (once that part of the JOBS act is implemented).

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#44

Post by oijaf888 »

ryandrake wrote: post #36
rayiner wrote: post #30

I think this is a positive step, but doesn't go far enough. It looks like investing is still limited to accredited investors (individual income above $200k, household income above $300k, or net worth above $1M). So basically, most engineers who work at these companies can't invest in companies in their industry, but inexplicably their doctor can. I'm not one to beat the drum of deregulation, but I think the accredite…

I'm not an expert, but if a few of those engineers pooled their money together into an investment club, wouldn't that club be able to meet the accredited investor requirement?

I don't believe the club would have to meet the requirement. I think if you do your investing via an LLC or Corporation you could subvert that rule but I'm not really sure.

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#45

Post by wissler »

diminoten wrote: post #32
wissler wrote: post #29

Earlier quoted context omitted.

"This to prevent exploitation of unsophisticated investors." Sure it is.

Can you make an actual argument, please? I'm interested in hearing what you have to say if you've got something to say other than snarky one-liners.

First of all, it's none of anyone's business what some individual wants to invest their money in. It's a moral obscenity to forcibly prevent him from investing.

It's not only presumptuous to say "if someone's not rich, they must not be smart enough to invest", it's a self-fulfilling kind of thing, isn't it?

Nothing prevents people from gambling in Vegas. So clearly these laws are not about protecting fools from their own foolishness. No, the laws are about only one thing: making sure that the people who are in charge of the economic system, stay in charge. And it's not just these SEC laws, there are a wide variety of laws that secure the elite from competition by the peasants.

Whenever someone claims they're keeping you from doing something for your own good, who pretends to be your parent, they really are your master.

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#46

Post by wwweston »

JumpCrisscross wrote: post #37
ChuckMcM wrote: post #8

I think this is a mixed blessing. I agree that the ban has been a hindrance on people trying to find investors but lifting it may not be the best solution. If you look at the way YC demo day works, its a pretty reasonable way for potential investors to find startups which are compatible with their investment goals. I think this addresses the challenge of the general solicitation rule (finding the startups) without th…

My instinct is to lash out against this move. General solicitation lowers the amount of social vetting a manager must go through before being able to raise funds. It also makes un-accredited investors more aware of the investment barriers around them, which could loosen resolve for maintaining those walls. But 2013 isn't 1933. The average sophisticated investor is more versed in finance, more wary of solicitation if…

> But 2013 isn't 1933. The average sophisticated investor is more versed in finance, more wary of solicitation if they are not, or closer to one of the former.

"This time, it's different."

http://www.reinhartandrogoff.com/

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#47

Post by lifeisstillgood »

I was listening to Alan Kay on the More or less blog today, and what he said resonated here.

Basically the stock market no longer bears any relation to the simple business of providing capital to companies to grow.

The trade in secondary markets is so huge that the stock market can happily ignore smaller growing companies - and it is it seems if VCs and similar are to be believed.

Plus we know it is - reaching IPO should be when a company really starts to deliver, takes the capital and expands. Not when the founders leave, and the growth halts.

So yes, a new stock market, not bound to the financial gaming house, is needed to supply capital to growing companies.

It wont be kickstarter. But it will be something. And I doubt it will be American. It will be a federation of small markets across India and Brazil and China.

And it wont be tech-led. We can barely use the capital.

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#48

Post by gbelote »

Echo117 wrote: post #9
cantankerous wrote: post #6

I've been a bit out of this loop, but what kinds of protections remain in place to protect small investors from hucksters "starting a company"? Is it pretty much caveat emptor or is there stuff not mentioned in this article? I think this approach is pretty cool, but there are these drawbacks. Are there going to be limits, protections, or restraints? Is the solicitation still only limited to qualified investors or how…

I'm assuming that qualified investors means accredited investors. SEC definition here: http://www.sec.gov/answers/accred.htm

That's correct. I changed the post to say "accredited" - thanks!

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#49

Post by cantankerous »

gbelote wrote: post #48
Echo117 wrote: post #9

Earlier quoted context omitted.

I'm assuming that qualified investors means accredited investors. SEC definition here: http://www.sec.gov/answers/accred.htm

That's correct. I changed the post to say "accredited" - thanks!

Okay I get it. That was my hangup. Thanks!

Re: The SEC Just Voted To Lift The Ban On General Solicitation

#50

Post by [deleted] »

ryandrake wrote: post #36
rayiner wrote: post #30

I think this is a positive step, but doesn't go far enough. It looks like investing is still limited to accredited investors (individual income above $200k, household income above $300k, or net worth above $1M). So basically, most engineers who work at these companies can't invest in companies in their industry, but inexplicably their doctor can. I'm not one to beat the drum of deregulation, but I think the accredite…

I'm not an expert, but if a few of those engineers pooled their money together into an investment club, wouldn't that club be able to meet the accredited investor requirement?

[deleted]
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