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The difference is that there is a limit to the number of public stocks and to the number of regulated casinos and lottery schemes that are out there. This make

by evgen 17y ago

The difference is that there is a limit to the number of public stocks and to the number of regulated casinos and lottery schemes that are out there. This makes policing the system for fraud and abuse a somewhat tractable problem. If there were no limits on angel investing then it would, in a heartbeat, become the preferred mechanism for scammers and fraudsters -- instead of getting sucked into a pump and dump scheme that the SEC might eventually find the victims would invest in fraudulent companies that would disappear in a puff of smoke once the checks clear...

gojomo 17y ago
What's there to 'police'? It was legal for GM to go bankrupt wiping out its stockholders. It's legal for a casino to take all a person's money. (And even the 'tractable' policing doesn't work so well: see Madoff and many smaller scams.) What's more, those people willing and able to 'disappear in a puff of smoke once the checks clear' can already do so. They don't care so much about the rules, and if willing to deceive can make their scams appear to fit whatever rules are in effect. And if this wave of fraud you predict were to appear, people would learn quickly. (Are there that many people who'd race to invest in loosely-attached, no-reputation fraudsters? Moreso than those same marks already gamble or buy snake oil?) And you could still chase down the biggest fraudsters, using the same laws and mechanisms that already exists. If any rule is necessary, a far more sensible rule would cap private-equity investment at some liberal percentage of net worth -- say 50%. You can easily lose 50% of your money in public stocks, even the stock market as a whole. So even the stupidest non-millionaire private investor wouldn't lose everything before understanding, "Hmm, I may need to do some due diligence on these get-rich-quick schemes!"
- tptacek 17y ago
  GM was required to disclose huge amounts of information to the public on a regular basis about its operations and cash flow. The SEC doesn't exist to reduce the risk of bona fide investing. It's there to reduce the instance of out-and-out fraud.

by evgen 17y ago

gojomo 17y ago

What's there to 'police'? It was legal for GM to go bankrupt wiping out its stockholders. It's legal for a casino to take all a person's money. (And even the 'tractable' policing doesn't work so well: see Madoff and many smaller scams.) What's more, those people willing and able to 'disappear in a puff of smoke once the checks clear' can already do so. They don't care so much about the rules, and if willing to deceive can make their scams appear to fit whatever rules are in effect. And if this wave of fraud you predict were to appear, people would learn quickly. (Are there that many people who'd race to invest in loosely-attached, no-reputation fraudsters? Moreso than those same marks already gamble or buy snake oil?) And you could still chase down the biggest fraudsters, using the same laws and mechanisms that already exists. If any rule is necessary, a far more sensible rule would cap private-equity investment at some liberal percentage of net worth -- say 50%. You can easily lose 50% of your money in public stocks, even the stock market as a whole. So even the stupidest non-millionaire private investor wouldn't lose everything before understanding, "Hmm, I may need to do some due diligence on these get-rich-quick schemes!"

tptacek 17y ago
GM was required to disclose huge amounts of information to the public on a regular basis about its operations and cash flow. The SEC doesn't exist to reduce the risk of bona fide investing. It's there to reduce the instance of out-and-out fraud.