8 ms·

The Libertarian in me agrees but then I think of the psychology of how people approach casino gambling vs business investing. For the former, I feel like peopl

The Libertarian in me agrees but then I think of the psychology of how people approach casino gambling vs business investing. For the former, I feel like people know going in that the odds are in favor of the house and they come to terms with that by saying to themselves that its entertainment. In other words, they kind-of expect to get screwed. In business investing its the opposite. They really do think they stand a chance at making millions even when the odds may actually be worse than gambling in some cases, especially if they fail to do their due diligence. So maybe instead of regulation we simply need a legal, notarized document signed for every investment that states "I am aware that I stand a very high chance of losing all of my money and relinquish my rights to sue anyone involved unless outright fraud has been established." Probably still wouldn't work, but its worth consideration.

gascan 9y ago
unless outright fraud has been established I've always suspected that was part of the reason- it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it.
- JumpCrisscross 9y ago
  > it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it Legal and diligence costs on most illiquid investments are tens of thousands of dollars. Anyone investing small amounts (a) can’t afford the diligence, (b) probably doesn’t know what they’re doing and (c) can’t afford to lose even that small amount. That attracts a specific variety of fraudster (see Bitconnect). We’ve seen this happen every time we break the wall between markets with high and low information assymetry.
tomkarlo 9y ago
Generally any compliant securities issuance will have something to this effect - the "Risk Factors" section. The problem is it's often drowned out the broader hype of an offering, or a seller will say "they make us say that, don't worry about it." Unscrupulous issuers have historically targeted less-sophisticated buyers who are less likely to be experienced investors - and also less likely to retain their own counsel to review an offering. Hence the accredited req.

gascan 9y ago

unless outright fraud has been established I've always suspected that was part of the reason- it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it.

JumpCrisscross 9y ago
> it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it Legal and diligence costs on most illiquid investments are tens of thousands of dollars. Anyone investing small amounts (a) can’t afford the diligence, (b) probably doesn’t know what they’re doing and (c) can’t afford to lose even that small amount. That attracts a specific variety of fraudster (see Bitconnect). We’ve seen this happen every time we break the wall between markets with high and low information assymetry.

tomkarlo 9y ago

Generally any compliant securities issuance will have something to this effect - the "Risk Factors" section. The problem is it's often drowned out the broader hype of an offering, or a seller will say "they make us say that, don't worry about it." Unscrupulous issuers have historically targeted less-sophisticated buyers who are less likely to be experienced investors - and also less likely to retain their own counsel to review an offering. Hence the accredited req.