5 ms·

They moved from an objective definition to a subjective definition of "expertise". Expect many more regular people to be scammed out of their life savings.

xwdv 6y ago
People are more savvy these days than the old days. This can help more than it hurts.
- joosters 6y ago
  Any evidence for this? The stats seem to show the opposite, e.g. there has been 3x as much money lost to ponzi schemes pre -> post-Madoff :https://www.nytimes.com/2019/09/22/business/ponzi-scheme-bernie-madoff.html?action=click&module=RelatedLinks&pgtype=Article https://www.nytimes.com/2019/09/22/business/ponzi-scheme-ber...
  - gojomo 6y ago
    Indeed - and neither the accredited investor law nor the SEC's other enforcement have helped. So maybe letting non-wealthy people invest into the exact same well-documented, scrupulously-legal above-board deals in which wealthier people have always been allowed to invest could be better than the traditional-but-totally-failing paternalism?
- AlexandrB 6y ago
  Consider this as a counterexample: https://arstechnica.com/cars/2020/11/nikola-stock-soars-after-confused-investors-think-gm-deal-has-closed/ https://arstechnica.com/cars/2020/11/nikola-stock-soars-afte...
- dragonwriter 6y ago
  > People are more savvy these days than the old days. As compared to the complexity of available investment schemes, no, they probably aren't. On the other hand, "licensed investment advisors and people currently working in investment-related roles in financial firms" are probably more savvy about investing, as a class, than "people who happen to have more than $1M in assets or $200K in personal or 300K in personal+spouse income".
- joshmn 6y ago
  I'd beg to differ. It seems to me that these days, a domain name, WordPress install, and Facebook allows for anyone to be an expert or whistleblower anything and everything.
DennisP 6y ago
Before August their "objective definition" was just having money. Having money doesn't make you a good investor. Dentists for example are notoriously bad investors, but prior to the change were less "protected" than a person with less money who's certified as an investment advisor.
- CalChris 6y ago
  However, they didn't tighten the definition to prevent rich dentists from making bad decisions. They are loosening it which will allow even poor dentists to make bad decisions.
  - dragonwriter 6y ago
    > They are loosening it which will allow even poor dentists to make bad decisions. Um, under what part of the new standard would a "poor dentist" that would not qualify under the old standard qualify?
    - CalChris 6y ago
      natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution However, it is not possible to say since this class of professional certifications is not delineated. Dentistry may qualify. It may not.
      - dragonwriter 6y ago
        > However, it is not possible to say since this class of professional certifications is not delineated. Yes, it is quite specifically. The new rule also sets out standards (which would very much not seem to be likely to ever admit certification in dentistry) and a process for subsequent rulemaking to update the set of certifications, but any problem with certifications later adopted would be an issue with those actions, not the immediate action. The initial set is "the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), and the Licensed Investment Adviser Representative (Series 65)". [https://www.sec.gov/rules/final/2020/33-10824.pdf https://www.sec.gov/rules/final/2020/33-10824.pdf, bottom of p. 28]
johndevor 6y ago
> Expect many more regular people to be scammed out of their life savings. People get scammed all the time in a million different ways.
dragonwriter 6y ago
> They moved from an objective definition to a subjective definition of "expertise". No, they didn't. It remains objective, it just now tests expertise by objective standards, not merely wealth or income. (Which are, at best, more distant proxies for expertise than the new ones.) > Expect many more regular people to be scammed out of their life savings. The new added standards are less "regular people" than the the old, continued standards, so I don't think that's the case. If licensed professional investment advisors and the like are getting scammed out of their life savings because they are able to invest directly in unlicensed securities, than there is a real problem with the licensing systems or the process allowing the investments to be offered at all, regardless of investor qualifications.
- throwawaygh 6y ago
  > The new added standards are less "regular people" than the the old, continued standards I generally agree with your comment, but this doesn't make much sense. The old "$200K/300K or $1MM outside primary residence" standards are continued, right? So by definition, in raw numbers, there could only ever be at least as many "regular people"...
  - dragonwriter 6y ago
    I'm not saying their are fewer "regular people" in total (which, as you note, would be impossible, since this only adds new categories, rather than narrowing or eliminating old ones). I am saying that the new categories are less "regular people" than the existing, continuing ones, and are not opening up risk to regular people. The risk to "regular" people who are unsophisticated in investing is almost entirely in the old categories.
typenil 6y ago
This kind of elitist nonsense where people say "Accredited Investor" as if it implied some kind of education or certification. It was always just a certification that you had an excessive amount wealth. Sounds like you believe someone with a net worth of $900k or a salary of $190k is objectively incompetent become they're barely under the threshold. "Objective definition." What a joke.
- tehjoker 6y ago
  Right. It means when you invest in random ass companies and you get scammed, you can afford to lose the money. Someone with less money getting scammed with visions of dollar signs in their eyes isn't playing a bourgeois parlor game, they're playing with their housing, job, car, etc. To me, the previous SEC rule is just an acknowledgment of the real aristocratic underpinnings of an advanced capitalist economy.
gojomo 6y ago
Regular people who want to lose their life savings can still do so via overleveraged real estate, investing informally in small businesses, margin daytrading, sports betting, purchasing vanity higher education credentials, and nowadays, cryptocurrencies/cryptotokens. So, this won't cause any more people to lose money, but it may change the mix of things they lose it on. And because this will also open to non-wealthy people many good deals in above-board companies, that have been scrupulously following the law & attracting rich sophisticated investors, it will also benefit those well-behaved companies and their less-rich friends, family, supporters, & customers – a win for society.

xwdv 6y ago

People are more savvy these days than the old days. This can help more than it hurts.

joosters 6y ago
Any evidence for this? The stats seem to show the opposite, e.g. there has been 3x as much money lost to ponzi schemes pre -> post-Madoff :https://www.nytimes.com/2019/09/22/business/ponzi-scheme-bernie-madoff.html?action=click&module=RelatedLinks&pgtype=Article https://www.nytimes.com/2019/09/22/business/ponzi-scheme-ber...
- gojomo 6y ago
  Indeed - and neither the accredited investor law nor the SEC's other enforcement have helped. So maybe letting non-wealthy people invest into the exact same well-documented, scrupulously-legal above-board deals in which wealthier people have always been allowed to invest could be better than the traditional-but-totally-failing paternalism?
AlexandrB 6y ago
Consider this as a counterexample: https://arstechnica.com/cars/2020/11/nikola-stock-soars-after-confused-investors-think-gm-deal-has-closed/ https://arstechnica.com/cars/2020/11/nikola-stock-soars-afte...
dragonwriter 6y ago
> People are more savvy these days than the old days. As compared to the complexity of available investment schemes, no, they probably aren't. On the other hand, "licensed investment advisors and people currently working in investment-related roles in financial firms" are probably more savvy about investing, as a class, than "people who happen to have more than $1M in assets or $200K in personal or 300K in personal+spouse income".
joshmn 6y ago
I'd beg to differ. It seems to me that these days, a domain name, WordPress install, and Facebook allows for anyone to be an expert or whistleblower anything and everything.

DennisP 6y ago

Before August their "objective definition" was just having money. Having money doesn't make you a good investor. Dentists for example are notoriously bad investors, but prior to the change were less "protected" than a person with less money who's certified as an investment advisor.

CalChris 6y ago
However, they didn't tighten the definition to prevent rich dentists from making bad decisions. They are loosening it which will allow even poor dentists to make bad decisions.
- dragonwriter 6y ago
  > They are loosening it which will allow even poor dentists to make bad decisions. Um, under what part of the new standard would a "poor dentist" that would not qualify under the old standard qualify?
  - CalChris 6y ago
    natural persons holding in good standing one or more professional certifications or designations or other credentials from an accredited educational institution However, it is not possible to say since this class of professional certifications is not delineated. Dentistry may qualify. It may not.
    - dragonwriter 6y ago
      > However, it is not possible to say since this class of professional certifications is not delineated. Yes, it is quite specifically. The new rule also sets out standards (which would very much not seem to be likely to ever admit certification in dentistry) and a process for subsequent rulemaking to update the set of certifications, but any problem with certifications later adopted would be an issue with those actions, not the immediate action. The initial set is "the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), and the Licensed Investment Adviser Representative (Series 65)". [https://www.sec.gov/rules/final/2020/33-10824.pdf https://www.sec.gov/rules/final/2020/33-10824.pdf, bottom of p. 28]

johndevor 6y ago

> Expect many more regular people to be scammed out of their life savings. People get scammed all the time in a million different ways.

dragonwriter 6y ago

> They moved from an objective definition to a subjective definition of "expertise". No, they didn't. It remains objective, it just now tests expertise by objective standards, not merely wealth or income. (Which are, at best, more distant proxies for expertise than the new ones.) > Expect many more regular people to be scammed out of their life savings. The new added standards are less "regular people" than the the old, continued standards, so I don't think that's the case. If licensed professional investment advisors and the like are getting scammed out of their life savings because they are able to invest directly in unlicensed securities, than there is a real problem with the licensing systems or the process allowing the investments to be offered at all, regardless of investor qualifications.

throwawaygh 6y ago
> The new added standards are less "regular people" than the the old, continued standards I generally agree with your comment, but this doesn't make much sense. The old "$200K/300K or $1MM outside primary residence" standards are continued, right? So by definition, in raw numbers, there could only ever be at least as many "regular people"...
- dragonwriter 6y ago
  I'm not saying their are fewer "regular people" in total (which, as you note, would be impossible, since this only adds new categories, rather than narrowing or eliminating old ones). I am saying that the new categories are less "regular people" than the existing, continuing ones, and are not opening up risk to regular people. The risk to "regular" people who are unsophisticated in investing is almost entirely in the old categories.

typenil 6y ago

This kind of elitist nonsense where people say "Accredited Investor" as if it implied some kind of education or certification. It was always just a certification that you had an excessive amount wealth. Sounds like you believe someone with a net worth of $900k or a salary of $190k is objectively incompetent become they're barely under the threshold. "Objective definition." What a joke.

tehjoker 6y ago
Right. It means when you invest in random ass companies and you get scammed, you can afford to lose the money. Someone with less money getting scammed with visions of dollar signs in their eyes isn't playing a bourgeois parlor game, they're playing with their housing, job, car, etc. To me, the previous SEC rule is just an acknowledgment of the real aristocratic underpinnings of an advanced capitalist economy.

gojomo 6y ago

Regular people who want to lose their life savings can still do so via overleveraged real estate, investing informally in small businesses, margin daytrading, sports betting, purchasing vanity higher education credentials, and nowadays, cryptocurrencies/cryptotokens. So, this won't cause any more people to lose money, but it may change the mix of things they lose it on. And because this will also open to non-wealthy people many good deals in above-board companies, that have been scrupulously following the law & attracting rich sophisticated investors, it will also benefit those well-behaved companies and their less-rich friends, family, supporters, & customers – a win for society.