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> I personally don't see a big problem with that It protects the monopoly the investor class has on investments like these.

indubitable 9y ago
This also deters entrepreneurship from otherwise less established entities. The risk with regulations like this is that in attempting to keep out the scammers, you also end up keeping out smaller by otherwise completely authentic entities. In the worst case you end up keeping out smaller players, yet the scammers find creative ways around the system. Take, for instance, patents. They were initially envisioned as a way for independent inventors to ensure their ideas were not stolen. But a century of absurdly complex rules and regulations paired with extreme fees mostly keeps out very small scale inventors. On the other hands, the scammers are seemingly as active as ever and completely inappropriate patents are still regularly granted. So what have we truly accomplished?
- s73ver_ 9y ago
  If you're deterred by this kind of thing, then perhaps you're the kind of "entrepreneur" that should be discouraged. We absolutely do not need any more scammers in this space.
  - deleted 9y ago
    [deleted]
  - indubitable 9y ago
    SEC compliance comes with extensive fees, delays, and a century of legalese. Coin offerings do not have to fall in the tens of millions of dollars. It's a practical way for smaller startups to raise small amounts of money. For instance the first company that started Musk's rise was Zip2 - and it was started with money that was in the 5 figures. A coin offering instead of angel investors could have been an interesting option for a similar company now a days. For companies on this scale, having to hire a legal team to ensure compliance is a significant burden. How much do you think this will end up costing companies to comply with? Ultimately we'd all like to have 100% honest ICOs. But you have to balance the cost of compliance with the expected results. Many ICOs already block American investors and that was before this. How will this effect the rates of scams? How will this effect the rate of perfectly up and up ICOs that are not made available to US investors?
    - chickenfries 9y ago
      If an ICO is perfectly up and up they should abide by the same regulation as other securities. If you can’t afford the regulation then you can’t afford to sell securities. It seems like ICO boosters have a hard time believing that everyone isn’t a libertarian who wants there to be no regulation on ICOs.
      - kodablah 9y ago
        > If you can’t afford the regulation then you can’t afford to sell securities. People are growing tired of the pay-to-play barriers to entry. Why can't we have the regulations without the financial burdens? (Hint: the answer is not about following the regulations themselves, but artificially limiting supply to make for easier enforcement. Otherwise there are too many to meaningfully regulate.)
        s73ver_ 9y ago
        "Why can't we have the regulations without the financial burdens?" If you can find people willing to work for your without pay, you can.
        kodablah 9y ago
        I'm questioning the amount of work required as the burden, not the humans. IIRC, the SEC filings require multi-thousand dollar fees. Many government services do not (or not at that level). Do you believe all of those other government services are making people work without pay? I don't think it's fair that you blindly assume the fees are equal to the administrative costs when it seems clear to me they are set at a level to detract the action.
        chickenfries 9y ago
        How many government services require hours of work by lawyers per application? If you can't cough up a few thousand dollars or take our a small business loan to hire some lawyers, why should I believe that you're trustworthy enough to skirt regulations?
kordlessagain 9y ago
> It protects the monopoly the investor class has on investments like these. False. If anything, it exposes consistently larger "chunks of value" to the risk involved in the investment. Given accredited investors are used to evaluating risk it simply allows the to participate freely in the unknown risks of these types of investment vehicles without getting smaller investors involved in the mix. (It also prevents them from using their position against lower investment amounts made by lower accredited individuals.) The "protection" afforded here is to the common investor, who by definition does not carry a large store of value with them. By preventing them from investing directly, by way of limiting their involvement based on their stored values, the SEC is protecting the "collective stored value" of the lower classes. And, this makes sense, given the dollar's value is based in part on what people are willing to pay for a given set of objects. This is the responsibility of the Fed to US. An analogy would be the Yap allowing their children to go and mine Rai Stones by themselves. No sensible society would allow this to occur, given the dangers. And, yes, I'm comparing lower accredited investors to children, when considering the amount of knowledge they may carry with them regarding risk.
- jrs95 9y ago
  Who the hell in the "lower classes" is investing their money? Even a good share of middle class Americans have no investments at all or so few that their net worth is either negligible or negative. The idea that the SEC needs to be "protecting" these people when buying lottery tickets and cigarettes is legal is laughable.
- justrobert 9y ago
  And yet anyone can buy 3x leveraged ETF/ETNs and not understand how the products are structured. Some of those products, due to the structure, will always lose value over time as the futures used to replicate them are normally in contango. So some financial products where they will always drift to zero are fine, but investments in companies that have a chance to profit aren't allowed.
  - tptacek 9y ago
    You can create a company that has ludicrously limited opportunities to return its capital, and sell those to the public. You simply have to comply with the SEC's registration and disclosure rules --- in particular, you have to publish quarterly audited financials confirming your limited prospects. That is the difference between the "3x leveraged ETF" and the "company that has a chance at profit" in your example, not some weird value judgement the SEC is making.
itamarst 9y ago
And by "investments" you mean "worthless and fraudulent garbage", if we're talking about ICOs. Honestly garbage is probably worth more, might be recyclable or compostable. More broadly, there's a whole set of finance research showing that the investments that accredited investors get access to (private equity, VC, etc.) aren't any better that normal investments on a risk-adjusted basis.
- sillysaurus3 9y ago
  And yet, that worthless fraudulent garbage is one of the few ways to get rich. If Oculus had done an ICO instead of a kickstarter, my $400 wouldn't have been merely a preorder. The $400 would've become quite a handy sum by the time Oculus got acquired. That requires integrating ICOs into the existing startup structures, but it's worth trying.
  - jonknee 9y ago
    Or maybe your Oculus ICO would have been worthless because it wasn't an equity offering...
  - zeroxfe 9y ago
    > And yet, that worthless fraudulent garbage is one of the few ways to get rich. ...for the founders of said fraudulent garbage and perhaps a small number of very lucky people.
  - tptacek 9y ago
    There is a reason you need to be an accredited investor to buy startup stock, and it isn't because the elite banksters are trying to protect their monopoly (startup venture capital for early-stage --- anything prior to, say, a B-round --- startups is a rounding error). Changing the word "stock" to "coin" doesn't change any of the underlying dynamics.
    - ShabbosGoy 9y ago
      Aren’t ICOs covered under Reg CF of the JOBS Act though? That was the whole point of the JOBS act: to provide access to capital that an entrepreneur normally wouldn’t be able to obtain. An ICO is not a bad alternative to pre-seed funding.
antr 9y ago
you call it "investor class monopoly" (if such thing exists), I call it protecting citizens who can be easily duped
- whataretensors 9y ago
  Yet they don't protect people from pay day loans or from gambling. They only 'protect' intelligent people from getting out of the system they've rigged. They also don't protect workers from getting worthless secondary 'common' stock. Keep regurgitating their lies. It's working for them.
  - option_greek 9y ago
    The common stock is one of the most direct way of screwing workers. I guess anything is okay as long as it is part of fine print.
  - tptacek 9y ago
    When you take out a mortgage to bring more capital to a craps table, literally everybody involved knows you have a problem. The same is obviously not true for securities and speculative assets.
  - mrep 9y ago
    That's completely different. Those are regulated so you know the exact deal you are getting up front.
- jMyles 9y ago
  It's basically "think of the children!" except you extend childhood to all of life. Perfect, really.
  - antr 9y ago
    Except the majority (let's say 99%) of all adults have zero financial literacy
    - 9y ago
igorgue 9y ago
It's almost predictable how people will respond here to a comment like this... You're 100% right.
- bdcravens 9y ago
  Indeed. "Investor class" just means having enough saved, or enough income, that you are prepared to make investments where you can lose money. It's like saying those with FICO's over 480 have a monopoly on the ability to get a car loan, or that those with basic math skills have a monopoly on programming jobs.
  - kodablah 9y ago
    > It's like saying those with FICO's over 480 have a monopoly on the ability to get a car loan, or that those with basic math skills have a monopoly on programming jobs. Wrong. It's like saying there is a LAW requiring a certain credit score or a certain set of math skills. I don't have anything to add on whether investor accreditation is fair or not, but comparing federal law and regulations to loan or hiring opinions/choices is disingenuous. The comparison to predatory loan regulations or legal certification requirements for hiring would in fact be more apt.
    - bdcravens 9y ago
      That makes sense.
bdcravens 9y ago
The "investor class" are prepared to handle loss. This isn't free money that oligarchy are keeping from the poor. Perhaps the floor is currently too high, but you should absolutely have savings before you consider investments where you stand to lose. In other words, an "investment class".
ChuckMcM 9y ago
That phrase, and the combination of 'monopoly' and 'investor class' tends to jar me because as I see it the truth is exactly opposite to the sentiment expressed. Rather than protect the 'investment class' it protects people who can't afford to lose all of their investment. Part of the problem is a sort of systemic survivor bias where the accredited investors rarely talk about all the times they lost all of their investment, and instead focus on the ones where they made money (the more disproportionate the better). The reality is the most of the investment opportunities that are offered only to accredited investors lose money, and what that translates to is that most people, if allowed to invest in these things, would lose money they couldn't afford to lose. It can be hard to see that when an angel investor crows about a huge payday from someone they helped get started. And in hindsight it is "easy" to see how that deal made perfect sense. But imagine if you were allowed in on Uber's last fundraising round and now they are in danger of a 40% 'down round' courtesy of SoftBank? That second mortgage you took out on the 'hottest startup in the bay area' starts looking like you're going to have to pay it back by your own labor. Another argument I have heard made is "Hey, it's my money and who are you to tell me how to invest it?" (note told in the first person even though the 'you' reading this or commenting on it may have never made such an argument). I totally understand and resonate with that argument, but when you do invest it with someone who was very slick and had you completely believing that they could turn dog poo into gold, and it turns out after you lost your entire investment that they never really could and there was evidence in their books or history that, had you known, you never would have invested. Then you want them punished some how, but for what? Lying through omission and tricking you out of your money? And we have a system for that, its a bunch of regulations, imposed by the SEC, which allows the SEC to fine or jail people who violate them. And they include things like FD or Full Disclosure rules which demand they cannot lie to you by omission or it is on them. And if an investment is legit and they want to offer it to non-accredited investors, then the person selling the securities will go through the necessary hoops and there won't be an issue selling them to you.
- hackinthebochs 9y ago
  > Rather than protect the 'investment class' it protects people who can't afford to lose all of their investment. The problem is that this isn't a binary. To protect the hapless grandparents from losing their retirement, it also restricts knowledgeable but not rich people from making informed decisions for themselves.

indubitable 9y ago

This also deters entrepreneurship from otherwise less established entities. The risk with regulations like this is that in attempting to keep out the scammers, you also end up keeping out smaller by otherwise completely authentic entities. In the worst case you end up keeping out smaller players, yet the scammers find creative ways around the system. Take, for instance, patents. They were initially envisioned as a way for independent inventors to ensure their ideas were not stolen. But a century of absurdly complex rules and regulations paired with extreme fees mostly keeps out very small scale inventors. On the other hands, the scammers are seemingly as active as ever and completely inappropriate patents are still regularly granted. So what have we truly accomplished?

s73ver_ 9y ago
If you're deterred by this kind of thing, then perhaps you're the kind of "entrepreneur" that should be discouraged. We absolutely do not need any more scammers in this space.
- deleted 9y ago
  [deleted]
- indubitable 9y ago
  SEC compliance comes with extensive fees, delays, and a century of legalese. Coin offerings do not have to fall in the tens of millions of dollars. It's a practical way for smaller startups to raise small amounts of money. For instance the first company that started Musk's rise was Zip2 - and it was started with money that was in the 5 figures. A coin offering instead of angel investors could have been an interesting option for a similar company now a days. For companies on this scale, having to hire a legal team to ensure compliance is a significant burden. How much do you think this will end up costing companies to comply with? Ultimately we'd all like to have 100% honest ICOs. But you have to balance the cost of compliance with the expected results. Many ICOs already block American investors and that was before this. How will this effect the rates of scams? How will this effect the rate of perfectly up and up ICOs that are not made available to US investors?
  - chickenfries 9y ago
    If an ICO is perfectly up and up they should abide by the same regulation as other securities. If you can’t afford the regulation then you can’t afford to sell securities. It seems like ICO boosters have a hard time believing that everyone isn’t a libertarian who wants there to be no regulation on ICOs.
    - kodablah 9y ago
      > If you can’t afford the regulation then you can’t afford to sell securities. People are growing tired of the pay-to-play barriers to entry. Why can't we have the regulations without the financial burdens? (Hint: the answer is not about following the regulations themselves, but artificially limiting supply to make for easier enforcement. Otherwise there are too many to meaningfully regulate.)
      - s73ver_ 9y ago
        "Why can't we have the regulations without the financial burdens?" If you can find people willing to work for your without pay, you can.
        kodablah 9y ago
        I'm questioning the amount of work required as the burden, not the humans. IIRC, the SEC filings require multi-thousand dollar fees. Many government services do not (or not at that level). Do you believe all of those other government services are making people work without pay? I don't think it's fair that you blindly assume the fees are equal to the administrative costs when it seems clear to me they are set at a level to detract the action.
        chickenfries 9y ago
        How many government services require hours of work by lawyers per application? If you can't cough up a few thousand dollars or take our a small business loan to hire some lawyers, why should I believe that you're trustworthy enough to skirt regulations?

kordlessagain 9y ago

> It protects the monopoly the investor class has on investments like these. False. If anything, it exposes consistently larger "chunks of value" to the risk involved in the investment. Given accredited investors are used to evaluating risk it simply allows the to participate freely in the unknown risks of these types of investment vehicles without getting smaller investors involved in the mix. (It also prevents them from using their position against lower investment amounts made by lower accredited individuals.) The "protection" afforded here is to the common investor, who by definition does not carry a large store of value with them. By preventing them from investing directly, by way of limiting their involvement based on their stored values, the SEC is protecting the "collective stored value" of the lower classes. And, this makes sense, given the dollar's value is based in part on what people are willing to pay for a given set of objects. This is the responsibility of the Fed to US. An analogy would be the Yap allowing their children to go and mine Rai Stones by themselves. No sensible society would allow this to occur, given the dangers. And, yes, I'm comparing lower accredited investors to children, when considering the amount of knowledge they may carry with them regarding risk.

jrs95 9y ago
Who the hell in the "lower classes" is investing their money? Even a good share of middle class Americans have no investments at all or so few that their net worth is either negligible or negative. The idea that the SEC needs to be "protecting" these people when buying lottery tickets and cigarettes is legal is laughable.
justrobert 9y ago
And yet anyone can buy 3x leveraged ETF/ETNs and not understand how the products are structured. Some of those products, due to the structure, will always lose value over time as the futures used to replicate them are normally in contango. So some financial products where they will always drift to zero are fine, but investments in companies that have a chance to profit aren't allowed.
- tptacek 9y ago
  You can create a company that has ludicrously limited opportunities to return its capital, and sell those to the public. You simply have to comply with the SEC's registration and disclosure rules --- in particular, you have to publish quarterly audited financials confirming your limited prospects. That is the difference between the "3x leveraged ETF" and the "company that has a chance at profit" in your example, not some weird value judgement the SEC is making.

itamarst 9y ago

And by "investments" you mean "worthless and fraudulent garbage", if we're talking about ICOs. Honestly garbage is probably worth more, might be recyclable or compostable. More broadly, there's a whole set of finance research showing that the investments that accredited investors get access to (private equity, VC, etc.) aren't any better that normal investments on a risk-adjusted basis.

sillysaurus3 9y ago
And yet, that worthless fraudulent garbage is one of the few ways to get rich. If Oculus had done an ICO instead of a kickstarter, my $400 wouldn't have been merely a preorder. The $400 would've become quite a handy sum by the time Oculus got acquired. That requires integrating ICOs into the existing startup structures, but it's worth trying.
- jonknee 9y ago
  Or maybe your Oculus ICO would have been worthless because it wasn't an equity offering...
- zeroxfe 9y ago
  > And yet, that worthless fraudulent garbage is one of the few ways to get rich. ...for the founders of said fraudulent garbage and perhaps a small number of very lucky people.
- tptacek 9y ago
  There is a reason you need to be an accredited investor to buy startup stock, and it isn't because the elite banksters are trying to protect their monopoly (startup venture capital for early-stage --- anything prior to, say, a B-round --- startups is a rounding error). Changing the word "stock" to "coin" doesn't change any of the underlying dynamics.
  - ShabbosGoy 9y ago
    Aren’t ICOs covered under Reg CF of the JOBS Act though? That was the whole point of the JOBS act: to provide access to capital that an entrepreneur normally wouldn’t be able to obtain. An ICO is not a bad alternative to pre-seed funding.

antr 9y ago

you call it "investor class monopoly" (if such thing exists), I call it protecting citizens who can be easily duped

whataretensors 9y ago
Yet they don't protect people from pay day loans or from gambling. They only 'protect' intelligent people from getting out of the system they've rigged. They also don't protect workers from getting worthless secondary 'common' stock. Keep regurgitating their lies. It's working for them.
- option_greek 9y ago
  The common stock is one of the most direct way of screwing workers. I guess anything is okay as long as it is part of fine print.
- tptacek 9y ago
  When you take out a mortgage to bring more capital to a craps table, literally everybody involved knows you have a problem. The same is obviously not true for securities and speculative assets.
- mrep 9y ago
  That's completely different. Those are regulated so you know the exact deal you are getting up front.
jMyles 9y ago
It's basically "think of the children!" except you extend childhood to all of life. Perfect, really.
- antr 9y ago
  Except the majority (let's say 99%) of all adults have zero financial literacy
  - 9y ago

igorgue 9y ago

It's almost predictable how people will respond here to a comment like this... You're 100% right.

bdcravens 9y ago
Indeed. "Investor class" just means having enough saved, or enough income, that you are prepared to make investments where you can lose money. It's like saying those with FICO's over 480 have a monopoly on the ability to get a car loan, or that those with basic math skills have a monopoly on programming jobs.
- kodablah 9y ago
  > It's like saying those with FICO's over 480 have a monopoly on the ability to get a car loan, or that those with basic math skills have a monopoly on programming jobs. Wrong. It's like saying there is a LAW requiring a certain credit score or a certain set of math skills. I don't have anything to add on whether investor accreditation is fair or not, but comparing federal law and regulations to loan or hiring opinions/choices is disingenuous. The comparison to predatory loan regulations or legal certification requirements for hiring would in fact be more apt.
  - bdcravens 9y ago
    That makes sense.

bdcravens 9y ago

The "investor class" are prepared to handle loss. This isn't free money that oligarchy are keeping from the poor. Perhaps the floor is currently too high, but you should absolutely have savings before you consider investments where you stand to lose. In other words, an "investment class".

ChuckMcM 9y ago

That phrase, and the combination of 'monopoly' and 'investor class' tends to jar me because as I see it the truth is exactly opposite to the sentiment expressed. Rather than protect the 'investment class' it protects people who can't afford to lose all of their investment. Part of the problem is a sort of systemic survivor bias where the accredited investors rarely talk about all the times they lost all of their investment, and instead focus on the ones where they made money (the more disproportionate the better). The reality is the most of the investment opportunities that are offered only to accredited investors lose money, and what that translates to is that most people, if allowed to invest in these things, would lose money they couldn't afford to lose. It can be hard to see that when an angel investor crows about a huge payday from someone they helped get started. And in hindsight it is "easy" to see how that deal made perfect sense. But imagine if you were allowed in on Uber's last fundraising round and now they are in danger of a 40% 'down round' courtesy of SoftBank? That second mortgage you took out on the 'hottest startup in the bay area' starts looking like you're going to have to pay it back by your own labor. Another argument I have heard made is "Hey, it's my money and who are you to tell me how to invest it?" (note told in the first person even though the 'you' reading this or commenting on it may have never made such an argument). I totally understand and resonate with that argument, but when you do invest it with someone who was very slick and had you completely believing that they could turn dog poo into gold, and it turns out after you lost your entire investment that they never really could and there was evidence in their books or history that, had you known, you never would have invested. Then you want them punished some how, but for what? Lying through omission and tricking you out of your money? And we have a system for that, its a bunch of regulations, imposed by the SEC, which allows the SEC to fine or jail people who violate them. And they include things like FD or Full Disclosure rules which demand they cannot lie to you by omission or it is on them. And if an investment is legit and they want to offer it to non-accredited investors, then the person selling the securities will go through the necessary hoops and there won't be an issue selling them to you.

hackinthebochs 9y ago
> Rather than protect the 'investment class' it protects people who can't afford to lose all of their investment. The problem is that this isn't a binary. To protect the hapless grandparents from losing their retirement, it also restricts knowledgeable but not rich people from making informed decisions for themselves.