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You don't think people should have the freedom to invest their money in whatever they want to? Or is that a privilege that only wealthy people should enjoy?

InvisibleCities 11y ago
The reality is that it is impossible for everyone to be an expert in everything. At some point, certain fields, medicine and finance for example, become so complex that it is impossible for a lay-person to make an informed decision. Historically, when lay-people are given the freedom to "use their money however they want" within these fields, hucksters and frauds have quite successfully conned them because it is impossible for a lay-person to tell the difference between a legitimate opportunity and a scam; they don't have the expertise, experience, and even the time to perform the due-diligence needed to make an informed decision. While these regulations are certainly a blunt instrument, and they do prevent a very small segment of the lay-population who could make an informed decision from doing so, the alternative is far worse.
- Zikes 11y ago
  Having money doesn't automatically make someone an expert in all of those fields, either, but that seems to be the only actual requirement to become "accredited".
  - tptacek 11y ago
    It doesn't make them an expert, but it does reduce the likelihood that the losses they take on a given investment are likely to impact their retirement.
- Rat_King 11y ago
  This poster is right, people are not qualified to use their money freely. Their freedom must be restricted because of our beliefs.
- deleted 11y ago
  [deleted]
- jsprogrammer 11y ago
  Taken as whole, this explanation doesn't make complete sense. States routinely run opportunities/scams that target the "lay population". Why don't these regulations address actual harm, rather than hypothetical harm?
  - sanderjd 11y ago
    I think they did address actual harm. It is only hypothetical now because it has already been addressed. States do routinely "run opportunities/scams" that also likely do actual harm (assuming you're referring to lotteries here). They probably shouldn't do that. But that they do doesn't suggest that they have just given up all their justification to prevent other harm through regulation.
Zikes 11y ago
Only the rich are allowed to get richer. We poor people wouldn't know what to do with money if we had it, we can't possibly be trusted with what little we have.
- tptacek 11y ago
  Well, the rich are mathematically favored to get richer, almost no matter what public policy decisions we make, short of tax rates that even Scandinavians would call confiscatory. But that aside: do you honestly think that the opportunity to invest in small "private" companies is likely to make non-rich people rich? I don't think so. Angel investing is a notorious trap for flush cashed-out startup people, because it's hard to make angel portfolios work. And those are people with relatively huge financial resources to draw on! Normal people have many more liabilities than just lack of accreditation in competing with rich people in venture capital.
  - jsprogrammer 11y ago
    If the goal is to get rich, pretty much any endeavor will fail. It's a non-goal. "non-rich" people could be interested in contributing money to endeavors they deem worthwhile. Current rules prevent most from contributing to such endeavors, however.
  - atom-morgan 11y ago
    The likelihood of getting rich has nothing to do with my right to use my money as I see fit.
    - msellout 11y ago
      "my right" is a strange term. It's entirely a social concept and is defined by the society you happen to live in (and re-defined by every subset of that society). In a sense, money is just a technology a society uses for allocating its resources. So, yes, the society/government can regulate how you can spend your money as a little monkey-patch on its tech.
bsder 11y ago
The problem is the legal system. A single, large investor can sue, effectively, a corporation because they are on the same spending level. You need, roughly, a million dollars to sue a corporation. A group of small investors have a VERY difficult time suing that same corporation. They have to be very unified, and, even then, it's very expensive. If the company is effectively burning up the money, it is very difficult to prove fraud and takes a very long time to do it. And your fighting your own investment which is paying the lawyers on the other side. So, if you've invested, say, $50K, the company can basically run away with it and there is almost nothing cost-effective you can do. Even if you win, the company can go bankrupt--so your lawyer won't take things on contingency. Maybe you can interest the government in a securities or tax fraud case, but don't hold your breath. Look at the problems with Kickstarter and the lack of ability to get your money back when things are, quite obvious, malfeasance. Those same problems hold until you start talking individual investments of almost 500K+. Even worse, hucksters are VERY good at rooking people intentionally. I went through a case where a small group of us were showing the red flags all over the place (no financial statements, no board meetings, on, and on, etc.), and people still sided with the huckster. The vast majority of people are dumber than you think.

InvisibleCities 11y ago

The reality is that it is impossible for everyone to be an expert in everything. At some point, certain fields, medicine and finance for example, become so complex that it is impossible for a lay-person to make an informed decision. Historically, when lay-people are given the freedom to "use their money however they want" within these fields, hucksters and frauds have quite successfully conned them because it is impossible for a lay-person to tell the difference between a legitimate opportunity and a scam; they don't have the expertise, experience, and even the time to perform the due-diligence needed to make an informed decision. While these regulations are certainly a blunt instrument, and they do prevent a very small segment of the lay-population who could make an informed decision from doing so, the alternative is far worse.

Zikes 11y ago
Having money doesn't automatically make someone an expert in all of those fields, either, but that seems to be the only actual requirement to become "accredited".
- tptacek 11y ago
  It doesn't make them an expert, but it does reduce the likelihood that the losses they take on a given investment are likely to impact their retirement.
Rat_King 11y ago
This poster is right, people are not qualified to use their money freely. Their freedom must be restricted because of our beliefs.
deleted 11y ago
[deleted]
jsprogrammer 11y ago
Taken as whole, this explanation doesn't make complete sense. States routinely run opportunities/scams that target the "lay population". Why don't these regulations address actual harm, rather than hypothetical harm?
- sanderjd 11y ago
  I think they did address actual harm. It is only hypothetical now because it has already been addressed. States do routinely "run opportunities/scams" that also likely do actual harm (assuming you're referring to lotteries here). They probably shouldn't do that. But that they do doesn't suggest that they have just given up all their justification to prevent other harm through regulation.

Zikes 11y ago

Only the rich are allowed to get richer. We poor people wouldn't know what to do with money if we had it, we can't possibly be trusted with what little we have.

tptacek 11y ago
Well, the rich are mathematically favored to get richer, almost no matter what public policy decisions we make, short of tax rates that even Scandinavians would call confiscatory. But that aside: do you honestly think that the opportunity to invest in small "private" companies is likely to make non-rich people rich? I don't think so. Angel investing is a notorious trap for flush cashed-out startup people, because it's hard to make angel portfolios work. And those are people with relatively huge financial resources to draw on! Normal people have many more liabilities than just lack of accreditation in competing with rich people in venture capital.
- jsprogrammer 11y ago
  If the goal is to get rich, pretty much any endeavor will fail. It's a non-goal. "non-rich" people could be interested in contributing money to endeavors they deem worthwhile. Current rules prevent most from contributing to such endeavors, however.
- atom-morgan 11y ago
  The likelihood of getting rich has nothing to do with my right to use my money as I see fit.
  - msellout 11y ago
    "my right" is a strange term. It's entirely a social concept and is defined by the society you happen to live in (and re-defined by every subset of that society). In a sense, money is just a technology a society uses for allocating its resources. So, yes, the society/government can regulate how you can spend your money as a little monkey-patch on its tech.

bsder 11y ago

The problem is the legal system. A single, large investor can sue, effectively, a corporation because they are on the same spending level. You need, roughly, a million dollars to sue a corporation. A group of small investors have a VERY difficult time suing that same corporation. They have to be very unified, and, even then, it's very expensive. If the company is effectively burning up the money, it is very difficult to prove fraud and takes a very long time to do it. And your fighting your own investment which is paying the lawyers on the other side. So, if you've invested, say, $50K, the company can basically run away with it and there is almost nothing cost-effective you can do. Even if you win, the company can go bankrupt--so your lawyer won't take things on contingency. Maybe you can interest the government in a securities or tax fraud case, but don't hold your breath. Look at the problems with Kickstarter and the lack of ability to get your money back when things are, quite obvious, malfeasance. Those same problems hold until you start talking individual investments of almost 500K+. Even worse, hucksters are VERY good at rooking people intentionally. I went through a case where a small group of us were showing the red flags all over the place (no financial statements, no board meetings, on, and on, etc.), and people still sided with the huckster. The vast majority of people are dumber than you think.