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SEC proposes changes to “accredited investor” definition

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Re: SEC proposes changes to “accredited investor” definition

#91

Post by rolltiide »

thephyber wrote: post #57
Keverw wrote: post #40

Kinda interesting they limit who can invest in things, yet you can go to the casino or blow all your money on lottery tickets. Seems like just another way for the rich to keep getting richer. Also always found it odd, the age for lottery and casino were different too, at least in the US. 18 for lotto, 21 for casino.

This regulation isn’t designed to protect you from yourself (eg addictive behaviors) or “investments” that are obviously bad for even those without a high school education. It’s designed to provide some minimal protection against sophisticated fraudsters (eg Bernie Madoff). SEC doesn’t govern lotto/gambling within states; that happens at a state level, just like alcohol and tobacco. I agree that the USA tends to have…

This outcome is ridiculous and has no place in American society. It was more tolerable when high growth companies IPO’d at $30mm market caps but that world doesn't exist, serving to put a spotlight on these regulations separating the primary economic growth engine’s opportunities to just the already wealthy.

Re: SEC proposes changes to “accredited investor” definition

#92

Post by alexmingoia »

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.

Re: SEC proposes changes to “accredited investor” definition

#93

Post by chillacy »

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.

Re: SEC proposes changes to “accredited investor” definition

#94

Post by rolltiide »

Proposal comments to post: all current and former FINRA and NASD license holders should be eligible as accredited.

A new unsponsored FINRA test for this specific purpose should be created as well (doesnt need to be in a federal proposal, just what can happen)

Finance and econ degree holders eligible too

I think this still sets the bar too high. There needs to be some way to opt out of the paternalism and take a chance in the securities market.

People are going to lose their shirts, just add a little disclaimer just like in public markets and on gambling posters.

Sometimes this will be an efficient allocation of capital for issuers that VCs dont share affinity for.

Re: SEC proposes changes to “accredited investor” definition

#96

Post by sk5t »

nullc wrote: post #49
asciimike wrote: post #41

Earlier quoted context omitted.

This is basically Matt Levine's argument [1], though he calls it a Certificate of Dumb Investment : To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want…

I was okay right up to the never complain part. There is a lot of fraud that goes unpunished because the victims feel hopeless and embarrassed. As a result, it's a lot more attractive to defraud people. A dumb investment might be dumb, it might be likely to be fraud. But if it turns out to actually be fraud, the victims should still be able to seek restitution or otherwise you are giving a free pass to commit fraud a…

Maybe the other side of the coin is that allowing all these dumb investments to take place would have the effect of overwhelming regulatory bodies and prosecutors with less-than-clear-cut missteps. I don't know, perhaps it is easier to regulate entities that have to file a 10K than it is to understand anything at all about private entities that have no similar filing requirement?

Re: SEC proposes changes to “accredited investor” definition

#97

Post by gumby »

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.

Re: SEC proposes changes to “accredited investor” definition

#98

Post by nicd »

ativzzz wrote: post #88
kelnos wrote: post #75

Earlier quoted context omitted.

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…

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.)

Re: SEC proposes changes to “accredited investor” definition

#99

Post by Retric »

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…

Stock trading is over 400 hundred years old so terms like insider trading are meaningful even without a strict definition. The SEC’s role is one of clarification not lawmaking.

Consider, the proposed law uses the word espionage does that cover say counting the number of trucks leaving a factory? That’s the kind of thing where any specific choice is reasonable as long as everyone operates under the same rules.

Re: SEC proposes changes to “accredited investor” definition

#100

Post by SomewhatLikely »

gruez wrote: post #22
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.

>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.
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