4 ms·
It appears that Regulation D is a band aid on a shotgun wound. If I can gamble away my wealth on public stocks, or better yet at a casino, I can certainly back
by messel 17y ago
It appears that Regulation D is a band aid on a shotgun wound. If I can gamble away my wealth on public stocks, or better yet at a casino, I can certainly back my friend who's building a startup.
The act of getting capital from folks that are under the bar shouldn't damn a startup, there's something wrong with this whole process. We shouldn't stop at just nixing the Dodd bill, we should fix the process of angel investing and pooling resources to back those we trust, even if we don't have net worths over an arbitrary line.
Could a group of people who have net worths under the qualified investor line, pool resources and be considered over the line?
- grellas 17y agoIf the pool is formed for the purpose of making the investment, it does not help. The law in that case requires that each individual within the pool be evaluated to determine his or her investment status. In other words, forming a pool does not allow otherwise non-accredited investors to get around the accreditation requirements. It does not take them "over the line," to use your phrase.
- messel 17y agoAppreciate the legal explanation grellas.
- hristov 17y agoAgain, it is not true that you cannot back your friend. Investing in a friend's business is most certainly a private offering, so that it is probably exempt under 4.2 as grellas explained above. However, if the relationship becomes more tenuous, and he is not really your friend but a friend of a friend or a random acquaintance, then it might be judged to be a public offering.
- apinstein 17y agoThe reasons for the Reg D restrictions are not to shield people from risk, but rather to shield them from scams. When buying / selling publicly traded shares, there is enough regulation to reasonably protect people from outright scams. However, it is not uncommon for someone to "pitch" investment ideas to the public that are simply scams -- anything from straight-up ponzi schemes to simply running off with money never to be found again, etc etc.
- Daniel_Newby 17y agoNo. The restrictions are not to prevent scams, but to route them through middle-men who have captured the regulatory system. Actual scam protection could only be accomplished by licensing adulthood by formal test. The kind of mental child who falls for a Ponzi scheme is doomed to squander their resources if allowed to manage their own affairs.