4 ms·

I didn't know that such a regulation even exists. But I also don't understand why such a regulation needs to exist.

derivagral 6y ago
As I understand it, the intent of the law is to prevent non-financial people from losing thousands or more on random scams (e.g. ICOs, actual snake-oil, etc.) The result of the law is... less clear.
- tastyfreeze 6y ago
  There are many laws in regards to investment that are like that. Laws that "protect" inexperienced investors from getting had. I understand the intent but I feel the result is undesirable. They restrict investment opportunities to people that already have money. The message that they give is that just because you dont have dollars you dont have any financial sense.
  - wtvanhest 6y ago
    In the vast majority of cases, the good investment opportunities are already restricted to people with substantial assets or income. The vast majority of 'investment' opportunities available to people without substantial assets or income are scams, or very likely to underperform investments. Even in SV, VCs are feverishly competing to get their investments accepted by the best companies. The law may feel counterintuitive, but is a good investor protection that needs to be in place.
  - londons_explore 6y ago
    Anyone determined can get the required status to invest in accredited investor things... It just takes some determination - take the Series 65 exam and become an RIA - you only need to get ~70% of the multiple choice questions correct!
    - DennisP 6y ago
      In fairness that just changed in August. Before that you had to be a millionaire or make $200K/year.
ripply 6y ago
This limit is for less financially savvy people (those who are not an Accredited Investor per the SEC) to invest money into startups. The idea is to put an upper limit on funding from mom and pop to reduce the potential harm - think the ICO bubble of 2018. During the bubble, it was almost impossible to invest in a SEC compliant ICO as an unaccredited US investor and a lot of that was due to this limit existing and putting an upper limit ($1M) on money invested by the less financially savvy. Overseas, ICOs boomed due to the lack of international regulation and there were a lot of outright scams and pump and dumps happening which US investors were pretty much barred from investing in due to SEC regulations.
- jacobwilliamroy 6y ago
  Let the idiots self-destruct. Navigating finance is fairly simple. The people who came out of the 2008 housing crash untouched were the ones who had the basic common sense to say "If I don't understand this paperwork, I'm not going to sign it." All this regulation does is make the middleman necessary, and that is all a middleman's job is anyway.
  - deleted 6y ago
    [deleted]
  - oarabbus_ 6y ago
    The lack of empathy, reasonableness, common sense, or logic in this post is stunning.
    - jacobwilliamroy 6y ago
      You must have been one of those dumbasses who tried to rent out their house for less than their mortgage payment. Or maybe you're one of those wankers who thought that betting on people defaulting on their mortgages was a good idea. Otherwise, I don't know why you would be offended.
- MR4D 6y ago
  And yet the government actively encourages people to lever themselves up to 33x to buy a house (a very non-liquid asset). Or, you can start an LLC and leverage it with credit card debt. Both are risky, and not regulated. Even worse, the latter example is effectively the same as crowdfunding but with a population of 1. Given that most business fail in the first few years, I’d argue that the government’s “protection of the investor” is basically irrelevant. [1] - https://mymortgageinsider.com/three-percent-down-no-mortgage-insurance-loan/ https://mymortgageinsider.com/three-percent-down-no-mortgage...
cryptica 6y ago
I hate regulations which try to protect stupid people from their own incompetence while there are many very smart people waiting to have their first chance to prove their competence. The pie is limited and the only way to reward smart people is by allowing stupid people to fail so that smart people can take their place. When this happens, everyone wins, even the idiots win as consumers... The pie can only get bigger when you have smart people in charge. An idiot should never be anything more than a consumer, you can't put them in charge of investment or production. If an idiot has money, you want to take that money away from them as fast as possible. The system should aim to accelerate the failure of incompetent people, not slow it down.
- AnthonyMouse 6y ago
  In theory the problem with this is that the majority of people have some kind of retirement savings, and want to get a return on investment, but many have no clue what they're doing. Having them lose their retirement savings might cause the money to be invested more efficiently by someone else, but at scale it causes a different problem. On the other hand, that is the very problem social security is meant to address. It's not really any different if idiots lose their money investing in pets.com than if idiots lose their money in buying a Ferrari that immediately depreciates and incurs outsized maintenance costs, is it? So given that social security exists, maybe you're right.
refurb 6y ago
Have you gone back to see why those regulations were created in the first place? I mean, it's not like lawmakers just came up with them randomly.

As I understand it, the intent of the law is to prevent non-financial people from losing thousands or more on random scams (e.g. ICOs, actual snake-oil, etc.) The result of the law is... less clear.

tastyfreeze 6y ago
There are many laws in regards to investment that are like that. Laws that "protect" inexperienced investors from getting had. I understand the intent but I feel the result is undesirable. They restrict investment opportunities to people that already have money. The message that they give is that just because you dont have dollars you dont have any financial sense.
- wtvanhest 6y ago
  In the vast majority of cases, the good investment opportunities are already restricted to people with substantial assets or income. The vast majority of 'investment' opportunities available to people without substantial assets or income are scams, or very likely to underperform investments. Even in SV, VCs are feverishly competing to get their investments accepted by the best companies. The law may feel counterintuitive, but is a good investor protection that needs to be in place.
- londons_explore 6y ago
  Anyone determined can get the required status to invest in accredited investor things... It just takes some determination - take the Series 65 exam and become an RIA - you only need to get ~70% of the multiple choice questions correct!
  - DennisP 6y ago
    In fairness that just changed in August. Before that you had to be a millionaire or make $200K/year.

ripply 6y ago

This limit is for less financially savvy people (those who are not an Accredited Investor per the SEC) to invest money into startups. The idea is to put an upper limit on funding from mom and pop to reduce the potential harm - think the ICO bubble of 2018. During the bubble, it was almost impossible to invest in a SEC compliant ICO as an unaccredited US investor and a lot of that was due to this limit existing and putting an upper limit ($1M) on money invested by the less financially savvy. Overseas, ICOs boomed due to the lack of international regulation and there were a lot of outright scams and pump and dumps happening which US investors were pretty much barred from investing in due to SEC regulations.

jacobwilliamroy 6y ago
Let the idiots self-destruct. Navigating finance is fairly simple. The people who came out of the 2008 housing crash untouched were the ones who had the basic common sense to say "If I don't understand this paperwork, I'm not going to sign it." All this regulation does is make the middleman necessary, and that is all a middleman's job is anyway.
- deleted 6y ago
  [deleted]
- oarabbus_ 6y ago
  The lack of empathy, reasonableness, common sense, or logic in this post is stunning.
  - jacobwilliamroy 6y ago
    You must have been one of those dumbasses who tried to rent out their house for less than their mortgage payment. Or maybe you're one of those wankers who thought that betting on people defaulting on their mortgages was a good idea. Otherwise, I don't know why you would be offended.
MR4D 6y ago
And yet the government actively encourages people to lever themselves up to 33x to buy a house (a very non-liquid asset). Or, you can start an LLC and leverage it with credit card debt. Both are risky, and not regulated. Even worse, the latter example is effectively the same as crowdfunding but with a population of 1. Given that most business fail in the first few years, I’d argue that the government’s “protection of the investor” is basically irrelevant. [1] - https://mymortgageinsider.com/three-percent-down-no-mortgage-insurance-loan/ https://mymortgageinsider.com/three-percent-down-no-mortgage...

cryptica 6y ago

I hate regulations which try to protect stupid people from their own incompetence while there are many very smart people waiting to have their first chance to prove their competence. The pie is limited and the only way to reward smart people is by allowing stupid people to fail so that smart people can take their place. When this happens, everyone wins, even the idiots win as consumers... The pie can only get bigger when you have smart people in charge. An idiot should never be anything more than a consumer, you can't put them in charge of investment or production. If an idiot has money, you want to take that money away from them as fast as possible. The system should aim to accelerate the failure of incompetent people, not slow it down.

AnthonyMouse 6y ago
In theory the problem with this is that the majority of people have some kind of retirement savings, and want to get a return on investment, but many have no clue what they're doing. Having them lose their retirement savings might cause the money to be invested more efficiently by someone else, but at scale it causes a different problem. On the other hand, that is the very problem social security is meant to address. It's not really any different if idiots lose their money investing in pets.com than if idiots lose their money in buying a Ferrari that immediately depreciates and incurs outsized maintenance costs, is it? So given that social security exists, maybe you're right.

refurb 6y ago

Have you gone back to see why those regulations were created in the first place? I mean, it's not like lawmakers just came up with them randomly.