8 ms·

The idea of accredited investors horrifies me. The only way to get rich by investing is to get in early when the valuation is very low. These type of rules guar

The idea of accredited investors horrifies me. The only way to get rich by investing is to get in early when the valuation is very low. These type of rules guarantee that only people already rich will be able to get in early. The reason cryptocurrencies & ICOs are popular is they let anyone speculate and day trade.

conanbatt 9y ago
+1000 This is right on the mark. Remove accredited investor requirements, and all that money will go to better options, like for example, YC startups. Nothing could do more damage to the investor monopolies of the world than opening this funding venue.
- notyourday 9y ago
  Accredited investors requirement is what allows one not to be a subject to Blue Sky laws. We did not have it before Blue Sky laws were added. Let me assure you civilized societies need to have a separation between 82 year old grandma Suzi and Paris Hilton.
  - conanbatt 9y ago
    Are you account for the damage done by restricting investment into this? They say as much money moved into ICO's in the last 6 months as VC funding in the valley. To the very least, thats double the funding for tech startups: higher wages, more founders and higher absolute investment returns. The tragedy is that scam ICO's make it because they cant put it into better investments due to regulation. Its the classic case of a damaging restriction.
    - notyourday 9y ago
      Yes, I do. ICOs are scams.
      - conanbatt 9y ago
        And in good part provoked by the regulations you are in principle protecting..the people that put money into the ICO's most likely cannot legally invest in any startup in the U.S.
        notyourday 9y ago
        Of course they can: they (a) lie on their attestation and (b) waive their right to sue
  - summer_steven 9y ago
    > Accredited investors requirement is what allows one not to be a subject to Blue Sky laws. You think its a fair trade to lock 95% of Americans out of the investment market in order to protect the elderly? New law: accredited investing means passing a 1 week course to obtain an investment license, which must be renewed bianually. Now we can keep Grandma Suzy safe (because she hasn't passed the class) without locking 95% of Americans out of the investment market.
    - notyourday 9y ago
      I do not, frankly, care. Regulation should be uniform. If we do not care about Grandma Suzi being swindled by investment peddlers, we should allow people to invest into ICO and buyer beware. If we want to protect Grandma Suzi, we have rules and if a hot shot ICO investor wanna be happen to be hit by those rules so be it.
jstewartmobile 9y ago
Speculate and day trade, just like 1999! Only it's people talking about their cryptocoins instead of their AOL.
- ghaff 9y ago
  I wonder how many people from that era survived ahead or at least intact vs. losing a packet. I assume some lucked into bailing at the right time but I'm guessing not a lot. I'm not sure I'd have expected to see day trading touted as an investing approach that should be encouraged.
  - nostrademons 9y ago
    A fair number of people got out pretty far ahead. Occasionally you'll run across a local business in Silicon Valley that makes no economic sense (eg. a nightclub, or a meadery, or a rug merchant, or a restaurant that never seems to have customers) and then you find out the owner was an early Netscape employee or rented space to Paypal in exchange for equity. The bill was largely footed by large numbers of people who knew nothing about the technology. I know one person who founded a router company in 1996, IPO'd in 2000, cashed out his shares for ~8 figures right before the market cratered, and is using that to fund his second startup. I know another person who invested in all sorts of dot-coms in 2000 and lost her entire inheritance & life savings in that (and a few real-estate purchases in 2007). I'd bet that the second group outnumbers the first by a large margin, but people in the first do exist.
    - deleted 9y ago
      [deleted]
    - ghaff 9y ago
      Certainly some people got out of the dot-com era and did very well even if you exclude the Mark Cubans and Elon Musks of the world. I'm sometimes annoyed at myself that I didn't get into some stocks I actually knew a lot about early on although I didn't have a lot of money to invest at the time. I was more talking about day traders specifically. I suspect most of them burned up their capital at some point or other. And a lot of this is probably related to the maxim that when taxi drivers start offering you investment advice, it's likely time to get out.
wpietri 9y ago
Anyone could speculate and day trade before just as long as there was enough information available for retail investors to do so safely. That is, on the public markets. Private markets introduce much higher degrees of information asymmetry. Maybe you'll get rich, but your odds of losing your money are also much higher. The basic theory of accredited investors is, "Unsophisticated players aren't allowed to gamble unless they can afford to lose." I'm fine with that. I don't want to pay for the retirement of somebody who got talked into sinking their retirement funds into something that was fucked from the start. If we want to give people a cut of the proceeds of innovation, let them put their money in funds that in turn invest a reasonable proportion of the money in high-risk areas like VC. There the asymmetries are drastically reduced.
Chirael 9y ago
I think the idea of accredited investors is that those investments are very risky, and it limits them to people who can "afford" the risk. An accredited investor may be able to bear the brunt of 9 investments being a total loss, to get to the 10th that hits it out of the park, while a non-accredited investor may have her/his life savings (or a substantial enough part of it) wiped out on the first 1 or 2 deals. I'm not saying it's perfect - there's certainly an element of "the rich get/stay richer" too - but just that there's some kind of rationale for the rules (as I understand it anyway).
- ghaff 9y ago
  That and a lot of people really aren't qualified to judge the risk and fall victim to "You can't lose!" scams. Being rich is no guarantee of financial sophistication of course but there's some correlation. And, as you say, they're less likely to be wiped out even if they lose their investment. I agree it's not a perfect system and people who want to can find other ways to throw away their money. But we're probably not guilty of over-regulating financial markets in general.
  - smokeyj 9y ago
    > I agree it's not a perfect system I think it's a great system. But I also hate poor people and don't want them to have the same opportunities I have. Let them play the lottery instead right?
    - ghaff 9y ago
      For me personally, state lotteries work great. They're a very regressive tax. I also don't like them much and appreciate that, at least in my state, advertising and promotion was largely phased out. [ADDED: In case anyone missed the sarcasm I'm not a huge fan of state lotteries because they target the people who can least afford them. That said, I realize many buyers would go the less regulated route if they didn't exist.]
- wtfrmyinitials 9y ago
  I don't need the government to protect me from myself. Adults should be able to make their own decisions
rhino369 9y ago
Whatever small effect it has on upward mobility is outweighed by protecting ignorant[1] investors from getting scammed out of their meager life savings. >The reason cryptocurrencies & ICOs are popular is they let anyone speculate and day trade Even assuming this was good, you can trade as a non-accredited investor. [1] no disrespect intended, almost everyone is including me
JumpCrisscross 9y ago
I agree there should be a competency exemption to the SEC's "accredited investor" requirement [1]. FINRA already loves administering exams [2]. That said, contrast the S&L crisis [3] with Bernie Madoff's fraud [4]. The former lost $160 billion of regular Joes' money (along with wealthy investors'). $132 billion of taxpayer money had to be spent, alongside countless hours of regulators', judges' and lawmakers' time, again, on the public dime. A minor political crisis started (and subsided). With the latter, $70 billion was lost (though it might have been as "small" as $20 billion). Prosecutors and judges still got involved, but fines repaid their efforts. Systemic effects were largely contained. TL; DR We restrict the masses from illiquid investments procured through irregular channels because (1) the legal costs of diligence preclude small investments, meaning small investors either invest at a material disadvantage or invest too much (relative to their worth) and (2) the lower your worth, the higher the probability that a busted investment will lose you your shirt. That turns a financial problem into a de-stabilising political problem. Side note: early-stage investing isn't as profitable, on a risk-adjusted basis, as it might seem if one only counts the winners. [1] https://www.sec.gov/fast-answers/answers-accredhtm.html https://www.sec.gov/fast-answers/answers-accredhtm.html [2] http://www.finra.org/industry/qualification-exams http://www.finra.org/industry/qualification-exams [3] https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis [4] https://en.wikipedia.org/wiki/Bernard_Madoff#Size_of_loss_to_investors https://en.wikipedia.org/wiki/Bernard_Madoff#Size_of_loss_to... Disclaimer: I am not a lawyer. This is not legal, nor any other kind, of advice. Consult an investment adviser and a securities lawyer before making risky investments.
- xadhominemx 9y ago
  There are competency exemptions. For example, "knowledgeable employees" of private investment firms are allowed to participate in PE deals even if they are not accredited investors.
  - JumpCrisscross 9y ago
    > "knowledgeable employees" of private investment firms are allowed to participate in PE deals even if they are not accredited investors. These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition. Keep in mind, too, that start-ups can compensate their unaccredited employees with equity just the same. Disclaimer: I am not a lawyer. This is not legal nor securities advice.
billylindeman 9y ago
Accredited investor regulations horrifies me too. People should be free to do what they want with their money, and teaching people how to be a responsible investor makes more sense than removing their freedom to invest =\ I'd be in favor of needing to take a course on investment in order to be accredited, but having income requirements is bullshit and absolutely lends to making the rich richer and keeping the poor poor.
cortesoft 9y ago
An accredited investor is just a term for someone allowed to invest in things not regulated by the SEC. If you think that EVERYONE should be able to invest in things not regulated by the SEC, you are basically saying that being regulated by the SEC should be completely voluntary (i.e. a company can choose to be regulated or not). You can argue that it should work like that, but we intentionally decided to make SEC regulation the rule, and only grant exceptions for investors who have demonstrated they can handle the risk. There is nothing saying that a non-accredited investor can't invest when a valuation is low. The investment just has to be regulated by the SEC.
- ringaroundthetx 9y ago
  > You can argue that it should work like that, but we intentionally decided to make SEC regulation the rule, and only grant exceptions for investors who have demonstrated they can handle the risk. We had no say in this. The SEC unilaterally created modern day (1970s onward) accredited investor rules, although I'm sure they had their routine public comment period as if that made a difference. The 1930s Congress and public had no idea that exemption from their protection would take shape this way. Former accredited investor-like rules relied on financial literacy tests. These were predictable discriminatory and even the most compliant financial firms found them to be too vague. The SEC switched to the money tests to solve the lack of clarity and discrimination problems, LOL OOPS.
  - cortesoft 9y ago
    Sorry, the idea of SEC regulation being the rule, with only limited exceptions, was what I meant by the 'intentionally decided' bit. The exact mechanism for how an exemption is decided is certainly up for debate. I was simply saying the mandatory part was decided on by 'us'.
- conanbatt 9y ago
  Founders, employees, institutional and retail investors got together and voted for the SEC? Are you sure about that?

conanbatt 9y ago

+1000 This is right on the mark. Remove accredited investor requirements, and all that money will go to better options, like for example, YC startups. Nothing could do more damage to the investor monopolies of the world than opening this funding venue.

notyourday 9y ago
Accredited investors requirement is what allows one not to be a subject to Blue Sky laws. We did not have it before Blue Sky laws were added. Let me assure you civilized societies need to have a separation between 82 year old grandma Suzi and Paris Hilton.
- conanbatt 9y ago
  Are you account for the damage done by restricting investment into this? They say as much money moved into ICO's in the last 6 months as VC funding in the valley. To the very least, thats double the funding for tech startups: higher wages, more founders and higher absolute investment returns. The tragedy is that scam ICO's make it because they cant put it into better investments due to regulation. Its the classic case of a damaging restriction.
  - notyourday 9y ago
    Yes, I do. ICOs are scams.
    - conanbatt 9y ago
      And in good part provoked by the regulations you are in principle protecting..the people that put money into the ICO's most likely cannot legally invest in any startup in the U.S.
      - notyourday 9y ago
        Of course they can: they (a) lie on their attestation and (b) waive their right to sue
- summer_steven 9y ago
  > Accredited investors requirement is what allows one not to be a subject to Blue Sky laws. You think its a fair trade to lock 95% of Americans out of the investment market in order to protect the elderly? New law: accredited investing means passing a 1 week course to obtain an investment license, which must be renewed bianually. Now we can keep Grandma Suzy safe (because she hasn't passed the class) without locking 95% of Americans out of the investment market.
  - notyourday 9y ago
    I do not, frankly, care. Regulation should be uniform. If we do not care about Grandma Suzi being swindled by investment peddlers, we should allow people to invest into ICO and buyer beware. If we want to protect Grandma Suzi, we have rules and if a hot shot ICO investor wanna be happen to be hit by those rules so be it.

jstewartmobile 9y ago

Speculate and day trade, just like 1999! Only it's people talking about their cryptocoins instead of their AOL.

ghaff 9y ago
I wonder how many people from that era survived ahead or at least intact vs. losing a packet. I assume some lucked into bailing at the right time but I'm guessing not a lot. I'm not sure I'd have expected to see day trading touted as an investing approach that should be encouraged.
- nostrademons 9y ago
  A fair number of people got out pretty far ahead. Occasionally you'll run across a local business in Silicon Valley that makes no economic sense (eg. a nightclub, or a meadery, or a rug merchant, or a restaurant that never seems to have customers) and then you find out the owner was an early Netscape employee or rented space to Paypal in exchange for equity. The bill was largely footed by large numbers of people who knew nothing about the technology. I know one person who founded a router company in 1996, IPO'd in 2000, cashed out his shares for ~8 figures right before the market cratered, and is using that to fund his second startup. I know another person who invested in all sorts of dot-coms in 2000 and lost her entire inheritance & life savings in that (and a few real-estate purchases in 2007). I'd bet that the second group outnumbers the first by a large margin, but people in the first do exist.
  - deleted 9y ago
    [deleted]
  - ghaff 9y ago
    Certainly some people got out of the dot-com era and did very well even if you exclude the Mark Cubans and Elon Musks of the world. I'm sometimes annoyed at myself that I didn't get into some stocks I actually knew a lot about early on although I didn't have a lot of money to invest at the time. I was more talking about day traders specifically. I suspect most of them burned up their capital at some point or other. And a lot of this is probably related to the maxim that when taxi drivers start offering you investment advice, it's likely time to get out.

wpietri 9y ago

Anyone could speculate and day trade before just as long as there was enough information available for retail investors to do so safely. That is, on the public markets. Private markets introduce much higher degrees of information asymmetry. Maybe you'll get rich, but your odds of losing your money are also much higher. The basic theory of accredited investors is, "Unsophisticated players aren't allowed to gamble unless they can afford to lose." I'm fine with that. I don't want to pay for the retirement of somebody who got talked into sinking their retirement funds into something that was fucked from the start. If we want to give people a cut of the proceeds of innovation, let them put their money in funds that in turn invest a reasonable proportion of the money in high-risk areas like VC. There the asymmetries are drastically reduced.

Chirael 9y ago

I think the idea of accredited investors is that those investments are very risky, and it limits them to people who can "afford" the risk. An accredited investor may be able to bear the brunt of 9 investments being a total loss, to get to the 10th that hits it out of the park, while a non-accredited investor may have her/his life savings (or a substantial enough part of it) wiped out on the first 1 or 2 deals. I'm not saying it's perfect - there's certainly an element of "the rich get/stay richer" too - but just that there's some kind of rationale for the rules (as I understand it anyway).

ghaff 9y ago
That and a lot of people really aren't qualified to judge the risk and fall victim to "You can't lose!" scams. Being rich is no guarantee of financial sophistication of course but there's some correlation. And, as you say, they're less likely to be wiped out even if they lose their investment. I agree it's not a perfect system and people who want to can find other ways to throw away their money. But we're probably not guilty of over-regulating financial markets in general.
- smokeyj 9y ago
  > I agree it's not a perfect system I think it's a great system. But I also hate poor people and don't want them to have the same opportunities I have. Let them play the lottery instead right?
  - ghaff 9y ago
    For me personally, state lotteries work great. They're a very regressive tax. I also don't like them much and appreciate that, at least in my state, advertising and promotion was largely phased out. [ADDED: In case anyone missed the sarcasm I'm not a huge fan of state lotteries because they target the people who can least afford them. That said, I realize many buyers would go the less regulated route if they didn't exist.]
wtfrmyinitials 9y ago
I don't need the government to protect me from myself. Adults should be able to make their own decisions

rhino369 9y ago

Whatever small effect it has on upward mobility is outweighed by protecting ignorant[1] investors from getting scammed out of their meager life savings. >The reason cryptocurrencies & ICOs are popular is they let anyone speculate and day trade Even assuming this was good, you can trade as a non-accredited investor. [1] no disrespect intended, almost everyone is including me

JumpCrisscross 9y ago

I agree there should be a competency exemption to the SEC's "accredited investor" requirement [1]. FINRA already loves administering exams [2]. That said, contrast the S&L crisis [3] with Bernie Madoff's fraud [4]. The former lost $160 billion of regular Joes' money (along with wealthy investors'). $132 billion of taxpayer money had to be spent, alongside countless hours of regulators', judges' and lawmakers' time, again, on the public dime. A minor political crisis started (and subsided). With the latter, $70 billion was lost (though it might have been as "small" as $20 billion). Prosecutors and judges still got involved, but fines repaid their efforts. Systemic effects were largely contained. TL; DR We restrict the masses from illiquid investments procured through irregular channels because (1) the legal costs of diligence preclude small investments, meaning small investors either invest at a material disadvantage or invest too much (relative to their worth) and (2) the lower your worth, the higher the probability that a busted investment will lose you your shirt. That turns a financial problem into a de-stabilising political problem. Side note: early-stage investing isn't as profitable, on a risk-adjusted basis, as it might seem if one only counts the winners. [1] https://www.sec.gov/fast-answers/answers-accredhtm.html https://www.sec.gov/fast-answers/answers-accredhtm.html [2] http://www.finra.org/industry/qualification-exams http://www.finra.org/industry/qualification-exams [3] https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis [4] https://en.wikipedia.org/wiki/Bernard_Madoff#Size_of_loss_to_investors https://en.wikipedia.org/wiki/Bernard_Madoff#Size_of_loss_to... Disclaimer: I am not a lawyer. This is not legal, nor any other kind, of advice. Consult an investment adviser and a securities lawyer before making risky investments.

xadhominemx 9y ago
There are competency exemptions. For example, "knowledgeable employees" of private investment firms are allowed to participate in PE deals even if they are not accredited investors.
- JumpCrisscross 9y ago
  > "knowledgeable employees" of private investment firms are allowed to participate in PE deals even if they are not accredited investors. These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition. Keep in mind, too, that start-ups can compensate their unaccredited employees with equity just the same. Disclaimer: I am not a lawyer. This is not legal nor securities advice.

billylindeman 9y ago

Accredited investor regulations horrifies me too. People should be free to do what they want with their money, and teaching people how to be a responsible investor makes more sense than removing their freedom to invest =\ I'd be in favor of needing to take a course on investment in order to be accredited, but having income requirements is bullshit and absolutely lends to making the rich richer and keeping the poor poor.

cortesoft 9y ago

An accredited investor is just a term for someone allowed to invest in things not regulated by the SEC. If you think that EVERYONE should be able to invest in things not regulated by the SEC, you are basically saying that being regulated by the SEC should be completely voluntary (i.e. a company can choose to be regulated or not). You can argue that it should work like that, but we intentionally decided to make SEC regulation the rule, and only grant exceptions for investors who have demonstrated they can handle the risk. There is nothing saying that a non-accredited investor can't invest when a valuation is low. The investment just has to be regulated by the SEC.

ringaroundthetx 9y ago
> You can argue that it should work like that, but we intentionally decided to make SEC regulation the rule, and only grant exceptions for investors who have demonstrated they can handle the risk. We had no say in this. The SEC unilaterally created modern day (1970s onward) accredited investor rules, although I'm sure they had their routine public comment period as if that made a difference. The 1930s Congress and public had no idea that exemption from their protection would take shape this way. Former accredited investor-like rules relied on financial literacy tests. These were predictable discriminatory and even the most compliant financial firms found them to be too vague. The SEC switched to the money tests to solve the lack of clarity and discrimination problems, LOL OOPS.
- cortesoft 9y ago
  Sorry, the idea of SEC regulation being the rule, with only limited exceptions, was what I meant by the 'intentionally decided' bit. The exact mechanism for how an exemption is decided is certainly up for debate. I was simply saying the mandatory part was decided on by 'us'.
conanbatt 9y ago
Founders, employees, institutional and retail investors got together and voted for the SEC? Are you sure about that?