4 ms·

> The accredited investor rules in USA seem draconian I don't know about that - it hardly seems draconian, it's a trust-based system, entirely reliant on self

by cure 5y ago

> The accredited investor rules in USA seem draconian I don't know about that - it hardly seems draconian, it's a trust-based system, entirely reliant on self reporting. Most of the time you just have to check a box that says you are an "accredited investor". Sometimes they want you to upload a few bank statements.

djbusby 5y ago
If you check that box, then others run diligence and discover you've lied it's called fraud. Attitude like yours is why many early companies are obligating their investors to prove net-worth. So many people want to be investors they'd lie to get there - number one sign you're a bad investors. Don't cheat!
- blowski 5y ago
  I didn't see the OP saying you should lie, only that the system relies on self-reporting. If anything, I'd guess they agree that the system is open to abuse, but they're not saying people should therefore abuse it.
  - djbusby 5y ago
    Perhaps I'm just bitter I've been part of a non-zero amount of deals where there was one, or more, parties who've made that false claim. In an open group I participate in there are some early Angels and want-to-be investors. I've observed folks attempting this shortcut. And every time it's fucked over multiple people. So, yea, it's trust based - and truth will out.
    - cure 5y ago
      Sorry to hear that, that sucks!
    - Drdrdrq 5y ago
      For the uninitiated, what happens in this scenario? Does the deal fall through, do the other investors need to cover for the missing party,...?
      - djbusby 5y ago
        Mostly the deal falls apart, the company seeking investment can't get it (timely) - and may have to start all over (6mo process). Another outcome was that the folk buying in had to buy out the non-RegD parties - and crushed them on the price so those investors got a better price, the fraudulent actors didn't see the gains they thought, the company now has more % owned by new investor group than originally thought (which changes the control balance) and the founders are grumpy and distracted and mad at folk they thought were cool (and all that has a down-pressure on productivity while everyone involved gossips for a few weeks) Edit: of you're getting your FFF round, it's all private, that group can be unqualified and you mark the deal as a Loan, so when you raise your Angel round you'll pay them back, or start the payback - and let the Angels know that's happening. Part of the investment to service debt.
- catlifeonmars 5y ago
  OP was saying the system is flawed, not that they are exploiting the flaws in the system. Those aren’t the same thing.
- cure 5y ago
  > Attitude like yours is why many early companies are obligating their investors to prove net-worth. I didn't express any attitude about the current rules around "accredited investors", I merely expressed what the current status quo appears to be, i.e. the system is largely based on self reporting. Obviously, there are all sorts of problems with that. For what it's worth, I don't particularly like the current rules around "accredited investors", they seem pretty arbitrary, and at the same time too lax (self reporting) and too restrictive (obviously, these rules give rich people access to a lot of opportunities not available to others).
benatkin 5y ago
From what I can see, check stubs would work as well, you could have no money in the bank... https://news.bloomberglaw.com/securities-law/startups-and-crowdfunding-limits-sec-rule-changes-explained https://news.bloomberglaw.com/securities-law/startups-and-cr...

by cure 5y ago

djbusby 5y ago

If you check that box, then others run diligence and discover you've lied it's called fraud. Attitude like yours is why many early companies are obligating their investors to prove net-worth. So many people want to be investors they'd lie to get there - number one sign you're a bad investors. Don't cheat!

blowski 5y ago
I didn't see the OP saying you should lie, only that the system relies on self-reporting. If anything, I'd guess they agree that the system is open to abuse, but they're not saying people should therefore abuse it.
- djbusby 5y ago
  Perhaps I'm just bitter I've been part of a non-zero amount of deals where there was one, or more, parties who've made that false claim. In an open group I participate in there are some early Angels and want-to-be investors. I've observed folks attempting this shortcut. And every time it's fucked over multiple people. So, yea, it's trust based - and truth will out.
  - cure 5y ago
    Sorry to hear that, that sucks!
  - Drdrdrq 5y ago
    For the uninitiated, what happens in this scenario? Does the deal fall through, do the other investors need to cover for the missing party,...?
    - djbusby 5y ago
      Mostly the deal falls apart, the company seeking investment can't get it (timely) - and may have to start all over (6mo process). Another outcome was that the folk buying in had to buy out the non-RegD parties - and crushed them on the price so those investors got a better price, the fraudulent actors didn't see the gains they thought, the company now has more % owned by new investor group than originally thought (which changes the control balance) and the founders are grumpy and distracted and mad at folk they thought were cool (and all that has a down-pressure on productivity while everyone involved gossips for a few weeks) Edit: of you're getting your FFF round, it's all private, that group can be unqualified and you mark the deal as a Loan, so when you raise your Angel round you'll pay them back, or start the payback - and let the Angels know that's happening. Part of the investment to service debt.
catlifeonmars 5y ago
OP was saying the system is flawed, not that they are exploiting the flaws in the system. Those aren’t the same thing.
cure 5y ago
> Attitude like yours is why many early companies are obligating their investors to prove net-worth. I didn't express any attitude about the current rules around "accredited investors", I merely expressed what the current status quo appears to be, i.e. the system is largely based on self reporting. Obviously, there are all sorts of problems with that. For what it's worth, I don't particularly like the current rules around "accredited investors", they seem pretty arbitrary, and at the same time too lax (self reporting) and too restrictive (obviously, these rules give rich people access to a lot of opportunities not available to others).

benatkin 5y ago

From what I can see, check stubs would work as well, you could have no money in the bank... https://news.bloomberglaw.com/securities-law/startups-and-crowdfunding-limits-sec-rule-changes-explained https://news.bloomberglaw.com/securities-law/startups-and-cr...