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> a 21-year-old software developer In the past I have seen self-certification for Accredited Investor status, as well as out-sourced services that verify some

> a 21-year-old software developer In the past I have seen self-certification for Accredited Investor status, as well as out-sourced services that verify some data for a determination. I think response around what is legal or not is best left to those with a background and education in the legal profession.

gjsman-1000 3y ago
Original writer here. I wrote it initially because it would certainly not be legal for me to invest being not an Accredited Investor, and also because the "Accredited Investor" gibberish reeks of similar disclaimers used with ICOs (aka shitcoins). However, I agree that I cannot determine and have amended the title to include "(possibly)" as I do my best to argue; and I believe that Purism may well be violating the plain language of the relevant SEC sections that got certain shitcoins (and more legitimate ones like Ripple) into hot water. At a minimum though, I think we can agree that it is questionable conduct.
- dwallin 3y ago
  If you think something fishy is going on I recommend reporting them to the SEC and possible qualify for a nice reward if they actually are violating the law: https://www.sec.gov/whistleblower https://www.sec.gov/whistleblower
jmillikin 3y ago
There's nothing wrong with someone pointing out that something is illegal, for example I don't have to be a lawyer to note that stealing a car would violate criminal law. It's reasonable for the OP to note that if they were to invest in that deal, then someone must be breaking the law. Note also that what you call "self-certification" is just ... it's how things are for everyone? It's not like you can ask the SEC for a piece of paper documenting that you qualify. There are some professional licenses that automatically count, but if you made $210,000 in W-2 income last year there's no report submitted to a central registry of People Allowed To Make Risky Investments.
- gjsman-1000 3y ago
  Right. I am not a lawyer (writer here), but read this page (as called out in the article) about Rule 506(c). https://www.sec.gov/education/smallbusiness/exemptofferings/rule506c https://www.sec.gov/education/smallbusiness/exemptofferings/... The requirement they seem to follow is: "all purchasers in the offering are accredited investors and the issuer takes reasonable steps to verify purchasers’ accredited investor status" Purism argues that everyone must be an accredited investor; but they state they take no steps to verify anyone. They even say that it is impossible to comply with the law ("since there is no way for Purism to validate your accredited investor status"). Well, what is it then? Are they securities or not? If they aren't securities, why the accredited investor requirement? Are you instead going under Rule 504, which seems to prohibit anything publicly offered? If 504 doesn't work and you are ignoring a requirement for 506, is there some other section, or is it just (arguably) flat-out illegal? It doesn't take a lawyer to say that something's fishy. While the law is probably fuzzy on what that verification requires, Purism could at least just call people on the phone, and say, "hey, we need accredited investors, are you one? Do you fully understand what this means and what your obligations are?" And record the response for legal purposes.
  - quesera 3y ago
    I've seen these "reasonable steps" devolve to requiring the purchaser to explicitly state that they qualify in a legal document (contract).
  - glenngillen 3y ago
    I am not a lawyer, but I am apparently an "accredited investor". I have, multiple times, had to pay my accountant to generate a document where he attests that I meet the criteria to be considered an accredited investor so that I could invest in some startup. Easiest money my accountant ever makes. And the effort for the startup/founders is "sorry, we can't send you a term sheet until we get a certification of your accredited investor status from a licensed tax professional. We hope you understand". For Purism to claim it's impossible to do this is demonstrably bullshit.
- fsckboy 3y ago
andrewflnr 3y ago
> what is legal or not is best left to those with a background and education in the legal profession Tangent, but I just want everyone to recognize how obscenely absurd this (largely true) sentence is. How are we, the vast bulk of non-law-school-graduates, supposed to follow the law in our day to day lives if just figuring out what's legal literally requires multiple college degrees?
- jmillikin 3y ago
  Many people posting on the internet have this strange idea that American law is opaque and difficult to understand, but in general it's actually pretty accessible. If you can read software, you can read American legal documents. The reason lawyers get paid so much is that if you're doing something that is right on the boundary[0] then the difference between legal and illegal might be extremely fuzzy, and also worth a lot of money, so it's worth paying someone $1000 an hour to write a long brief in your local judge's preferred WordPerfect template about why what you're doing is OK. On the other hand, the SEC website linked by OP just has a checklist of Accredited Investor qualifications, and it's possible to read them. Do you have a salary of $300,000? You qualify. Did you make $195,000? Well, that's less than $200,000 so unless one of the other checkboxes matches, you're out of luck[1]. [0] Maybe it's illegal by the letter of the law but you think it shouldn't be, like ride-sharing in locations with taxi regulations. Or maybe it's not illegal but might be viewed with extreme skepticism by regulators, like offering a non-fraudy Bitcoin exchange. In both of those cases, there's an easy solution (just don't do the maybe-illegal thing) that is accessible to the layman. [1] Maybe you can hire a lawyer and/or CPA to get your $6000 of undeclared dog-walking income counted for the purposes of Accredited Investor qualification, but is it really worth the hassle?
  - digi59404 3y ago
    This isn’t really true. The law as written might be easily understood by reading it. But that is not the entire story. The US has multiple forms of law, Legislative Law, as ratified by the Legislative Body. Then Case Law which is law introduced by Judicial courts which may or may not invalidate, expand, or change the legislative law. The US also has courts under specific bodies such as the EPA. Lawyers exist to be able to tell you “the law says x, however the most common case law actually says Y.” In terms of investor, patent, and IP law this is SIGNIFICANT. You could be violating the investment laws enacted by the legislature; but it could be entirely legal because a court in your district invalidated that law. However, you fly to New York, a different district, and it’s illegal again. Determining what is legal and what is illegal can be exceptionally difficult. Because the layman doesn’t have access to the thousand dollar monthly subscription of LexusNexus to do case law searches. They probably don’t even know that this exists. Another example - California has a law on the books that states that you’re not allowed to own batons and nunchucks….. Except in Yuba County, where a Judge has thrown out the law via a court case, and the DA never appealed the ruling. But if you’re arrested by the CHP, instead of the Sheriff they can try you in State Court, and it applies again.

gjsman-1000 3y ago

Original writer here. I wrote it initially because it would certainly not be legal for me to invest being not an Accredited Investor, and also because the "Accredited Investor" gibberish reeks of similar disclaimers used with ICOs (aka shitcoins). However, I agree that I cannot determine and have amended the title to include "(possibly)" as I do my best to argue; and I believe that Purism may well be violating the plain language of the relevant SEC sections that got certain shitcoins (and more legitimate ones like Ripple) into hot water. At a minimum though, I think we can agree that it is questionable conduct.

dwallin 3y ago
If you think something fishy is going on I recommend reporting them to the SEC and possible qualify for a nice reward if they actually are violating the law: https://www.sec.gov/whistleblower https://www.sec.gov/whistleblower

jmillikin 3y ago

There's nothing wrong with someone pointing out that something is illegal, for example I don't have to be a lawyer to note that stealing a car would violate criminal law. It's reasonable for the OP to note that if they were to invest in that deal, then someone must be breaking the law. Note also that what you call "self-certification" is just ... it's how things are for everyone? It's not like you can ask the SEC for a piece of paper documenting that you qualify. There are some professional licenses that automatically count, but if you made $210,000 in W-2 income last year there's no report submitted to a central registry of People Allowed To Make Risky Investments.

gjsman-1000 3y ago
Right. I am not a lawyer (writer here), but read this page (as called out in the article) about Rule 506(c). https://www.sec.gov/education/smallbusiness/exemptofferings/rule506c https://www.sec.gov/education/smallbusiness/exemptofferings/... The requirement they seem to follow is: "all purchasers in the offering are accredited investors and the issuer takes reasonable steps to verify purchasers’ accredited investor status" Purism argues that everyone must be an accredited investor; but they state they take no steps to verify anyone. They even say that it is impossible to comply with the law ("since there is no way for Purism to validate your accredited investor status"). Well, what is it then? Are they securities or not? If they aren't securities, why the accredited investor requirement? Are you instead going under Rule 504, which seems to prohibit anything publicly offered? If 504 doesn't work and you are ignoring a requirement for 506, is there some other section, or is it just (arguably) flat-out illegal? It doesn't take a lawyer to say that something's fishy. While the law is probably fuzzy on what that verification requires, Purism could at least just call people on the phone, and say, "hey, we need accredited investors, are you one? Do you fully understand what this means and what your obligations are?" And record the response for legal purposes.
- quesera 3y ago
  I've seen these "reasonable steps" devolve to requiring the purchaser to explicitly state that they qualify in a legal document (contract).
- glenngillen 3y ago
  I am not a lawyer, but I am apparently an "accredited investor". I have, multiple times, had to pay my accountant to generate a document where he attests that I meet the criteria to be considered an accredited investor so that I could invest in some startup. Easiest money my accountant ever makes. And the effort for the startup/founders is "sorry, we can't send you a term sheet until we get a certification of your accredited investor status from a licensed tax professional. We hope you understand". For Purism to claim it's impossible to do this is demonstrably bullshit.
fsckboy 3y ago

andrewflnr 3y ago

> what is legal or not is best left to those with a background and education in the legal profession Tangent, but I just want everyone to recognize how obscenely absurd this (largely true) sentence is. How are we, the vast bulk of non-law-school-graduates, supposed to follow the law in our day to day lives if just figuring out what's legal literally requires multiple college degrees?

jmillikin 3y ago
Many people posting on the internet have this strange idea that American law is opaque and difficult to understand, but in general it's actually pretty accessible. If you can read software, you can read American legal documents. The reason lawyers get paid so much is that if you're doing something that is right on the boundary[0] then the difference between legal and illegal might be extremely fuzzy, and also worth a lot of money, so it's worth paying someone $1000 an hour to write a long brief in your local judge's preferred WordPerfect template about why what you're doing is OK. On the other hand, the SEC website linked by OP just has a checklist of Accredited Investor qualifications, and it's possible to read them. Do you have a salary of $300,000? You qualify. Did you make $195,000? Well, that's less than $200,000 so unless one of the other checkboxes matches, you're out of luck[1]. [0] Maybe it's illegal by the letter of the law but you think it shouldn't be, like ride-sharing in locations with taxi regulations. Or maybe it's not illegal but might be viewed with extreme skepticism by regulators, like offering a non-fraudy Bitcoin exchange. In both of those cases, there's an easy solution (just don't do the maybe-illegal thing) that is accessible to the layman. [1] Maybe you can hire a lawyer and/or CPA to get your $6000 of undeclared dog-walking income counted for the purposes of Accredited Investor qualification, but is it really worth the hassle?
- digi59404 3y ago
  This isn’t really true. The law as written might be easily understood by reading it. But that is not the entire story. The US has multiple forms of law, Legislative Law, as ratified by the Legislative Body. Then Case Law which is law introduced by Judicial courts which may or may not invalidate, expand, or change the legislative law. The US also has courts under specific bodies such as the EPA. Lawyers exist to be able to tell you “the law says x, however the most common case law actually says Y.” In terms of investor, patent, and IP law this is SIGNIFICANT. You could be violating the investment laws enacted by the legislature; but it could be entirely legal because a court in your district invalidated that law. However, you fly to New York, a different district, and it’s illegal again. Determining what is legal and what is illegal can be exceptionally difficult. Because the layman doesn’t have access to the thousand dollar monthly subscription of LexusNexus to do case law searches. They probably don’t even know that this exists. Another example - California has a law on the books that states that you’re not allowed to own batons and nunchucks….. Except in Yuba County, where a Judge has thrown out the law via a court case, and the DA never appealed the ruling. But if you’re arrested by the CHP, instead of the Sheriff they can try you in State Court, and it applies again.