6 ms·

The peasants still don't get to decide: if they're not accredited investors, they cannot invest. This to prevent exploitation of unsophisticated investors. Du

by codex 13y ago

The peasants still don't get to decide: if they're not accredited investors, they cannot invest. This to prevent exploitation of unsophisticated investors. During the Great Depression, many small time investors, including many blue collar workers, lost their entire investment portfolio due to the lack of security and oversight in the investment world.

wissler 13y ago
"This to prevent exploitation of unsophisticated investors." Sure it is.
- diminoten 13y ago
  Can you make an actual argument, please? I'm interested in hearing what you have to say if you've got something to say other than snarky one-liners.
  - NoPiece 13y ago
    Some accreddited investors, who by legal definition are rich, use "protecting the unsophisticated" as an excuse to maintain their monopoly on investing. http://www.sec.gov/answers/accred.htm http://www.sec.gov/answers/accred.htm
  - qdog 13y ago
    He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad. However, if you are someone who isn't an arbitrager(investor isn't the right term) in their daily job, the pressure to join the tulip buyers is a lot heavier than the available knowledge. The root of this problem is lies, because the tulip sellers are always going to give false data to encourage people to buy, and the amount of money changing hands will always attract a lot of unethical people. The libertarian mantra is that things will balance out via crowd sourcing (is it a market investing in a company that doesn't sell products yet? I argue not), yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.
    - pjlegato 13y ago
      And yet, these people are perfectly free to buy (goverment run) lottery tickets, or walk into a casino and put their entire life savings on the roulette wheel, both of which have a guaranteed negative expected value. At least with a startup investment, there is some small chance that they'll make money. At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical.
      - tomkarlo 13y ago
        Both lotteries and casino gambling are heavily regulated in terms of their returns to consumers, and there are reasonable methods of recovering value if they fail to perform as promised, because the entities are generally still operating. You can't do that with business investments -- there's no way to mandate a particular minimum return to investors, and no way to recover lost funds if the business fails to perform as promised. If I promise you safe 15% returns, and then I run the business in a high risk way and it goes under, there isn't any way for the state to really regulate that level of risk and return except in very highly regulated industries like insurance where money is being invested in rated securities (and even then, it's not great.) The biggest problem with private investments is that there generally isn't any liquid market to provide a "real" price. It's just whatever the company can convince an investor to pay. Nobody can short or sell you their shares easily, and if you buy in it can be impossible to sell out.
      - qdog 13y ago
        Giving money to companies is fine by me. The only desire is that a company that provides false data must be held accountable. Also someone running a scam facade, prosecutable, imho. I don't see the lottery as analogous to putting money into companies. Whether the lottery is good or not is a separate issue.
      - notahacker 13y ago
        I think you can justify preventing people from gambling whilst thinking they're investing even whilst permitting regulated gambling marketed as gambling. Similarly, the government permits the sale of alcohol, but not marketed as medicine. Vegas seduces with glamour rather than prospectuses filled with seductive, irrelevant statistics and passionate, sincere bullshit about how the team of MIT-educated croupiers, striking design and ambient temperature make the ball more likely to land on 27 than at any other venue. I think only one of the below needs to be true to suggest investment restrictions might be advisable even in the presence of legal gambling. (i) "unsophisticated" investors are significantly more likely to put their life savings into RandomStartupX than they are to put them on a roulette wheel (ii) RandomStartupX is more likely to return zero than a roulette wheel (even if market returns are positive there's a power law distribution and it's probability of returning zero that's more important to those without a well-constructed portfolio) (iii) Retail investors' realistic early stage "investment" options' expected value may well actually be lower than that of a spin of a roulette wheel assuming the top startups prefer the experience of top-tier investors, which doesn't seem unreasonable even when comparing between different tiers of VC funds
  - wissler 13y ago
    First of all, it's none of anyone's business what some individual wants to invest their money in. It's a moral obscenity to forcibly prevent him from investing. It's not only presumptuous to say "if someone's not rich, they must not be smart enough to invest", it's a self-fulfilling kind of thing, isn't it? Nothing prevents people from gambling in Vegas. So clearly these laws are not about protecting fools from their own foolishness. No, the laws are about only one thing: making sure that the people who are in charge of the economic system, stay in charge. And it's not just these SEC laws, there are a wide variety of laws that secure the elite from competition by the peasants. Whenever someone claims they're keeping you from doing something for your own good, who pretends to be your parent, they really are your master.
    - diminoten 13y ago
      We could use this argument to remove warning labels from all dangerous things. If you want to drive your vehicle without a seatbelt, who am I to force you to? Your seatbelt choices have no impact on anyone else except you, right?!
      - derekp7 13y ago
        That is exactly right. Also, if I want to ride my bicycle without a helmet, or go rock climbing, or cross the street without being wrapped in bubble wrap, that is my business too. Although the seat-belt thing does have some legitimacy, in that it keeps the drive in front of the wheel during an accident, allowing him to potentially keep some control over the car.
        anigbrowl 13y ago
        If you suffer a serious accident, it imposes an external cost on society. You may get presented with a bill afterwards, but even at the point of having the accident it's highly disruptive. Consider a car accident where you're berely inured and shaken up, v. one where you are ejected through the windscreen into the road. Which one is going to disrupt traffic for longer? keeps the drive in front of the wheel during an accident So you think passengers should not wear them?
skilesare 13y ago
Correct for now, but soon unaccredited investors will be able to invest as well....just waiting on the SEC rules on how it will work. There will be a limit per year based on income from what I understand.

by codex 13y ago

wissler 13y ago

"This to prevent exploitation of unsophisticated investors." Sure it is.

diminoten 13y ago
Can you make an actual argument, please? I'm interested in hearing what you have to say if you've got something to say other than snarky one-liners.
- NoPiece 13y ago
  Some accreddited investors, who by legal definition are rich, use "protecting the unsophisticated" as an excuse to maintain their monopoly on investing. http://www.sec.gov/answers/accred.htm http://www.sec.gov/answers/accred.htm
- qdog 13y ago
  He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad. However, if you are someone who isn't an arbitrager(investor isn't the right term) in their daily job, the pressure to join the tulip buyers is a lot heavier than the available knowledge. The root of this problem is lies, because the tulip sellers are always going to give false data to encourage people to buy, and the amount of money changing hands will always attract a lot of unethical people. The libertarian mantra is that things will balance out via crowd sourcing (is it a market investing in a company that doesn't sell products yet? I argue not), yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.
  - pjlegato 13y ago
    And yet, these people are perfectly free to buy (goverment run) lottery tickets, or walk into a casino and put their entire life savings on the roulette wheel, both of which have a guaranteed negative expected value. At least with a startup investment, there is some small chance that they'll make money. At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical.
    - tomkarlo 13y ago
      Both lotteries and casino gambling are heavily regulated in terms of their returns to consumers, and there are reasonable methods of recovering value if they fail to perform as promised, because the entities are generally still operating. You can't do that with business investments -- there's no way to mandate a particular minimum return to investors, and no way to recover lost funds if the business fails to perform as promised. If I promise you safe 15% returns, and then I run the business in a high risk way and it goes under, there isn't any way for the state to really regulate that level of risk and return except in very highly regulated industries like insurance where money is being invested in rated securities (and even then, it's not great.) The biggest problem with private investments is that there generally isn't any liquid market to provide a "real" price. It's just whatever the company can convince an investor to pay. Nobody can short or sell you their shares easily, and if you buy in it can be impossible to sell out.
    - qdog 13y ago
      Giving money to companies is fine by me. The only desire is that a company that provides false data must be held accountable. Also someone running a scam facade, prosecutable, imho. I don't see the lottery as analogous to putting money into companies. Whether the lottery is good or not is a separate issue.
    - notahacker 13y ago
      I think you can justify preventing people from gambling whilst thinking they're investing even whilst permitting regulated gambling marketed as gambling. Similarly, the government permits the sale of alcohol, but not marketed as medicine. Vegas seduces with glamour rather than prospectuses filled with seductive, irrelevant statistics and passionate, sincere bullshit about how the team of MIT-educated croupiers, striking design and ambient temperature make the ball more likely to land on 27 than at any other venue. I think only one of the below needs to be true to suggest investment restrictions might be advisable even in the presence of legal gambling. (i) "unsophisticated" investors are significantly more likely to put their life savings into RandomStartupX than they are to put them on a roulette wheel (ii) RandomStartupX is more likely to return zero than a roulette wheel (even if market returns are positive there's a power law distribution and it's probability of returning zero that's more important to those without a well-constructed portfolio) (iii) Retail investors' realistic early stage "investment" options' expected value may well actually be lower than that of a spin of a roulette wheel assuming the top startups prefer the experience of top-tier investors, which doesn't seem unreasonable even when comparing between different tiers of VC funds
- wissler 13y ago
  First of all, it's none of anyone's business what some individual wants to invest their money in. It's a moral obscenity to forcibly prevent him from investing. It's not only presumptuous to say "if someone's not rich, they must not be smart enough to invest", it's a self-fulfilling kind of thing, isn't it? Nothing prevents people from gambling in Vegas. So clearly these laws are not about protecting fools from their own foolishness. No, the laws are about only one thing: making sure that the people who are in charge of the economic system, stay in charge. And it's not just these SEC laws, there are a wide variety of laws that secure the elite from competition by the peasants. Whenever someone claims they're keeping you from doing something for your own good, who pretends to be your parent, they really are your master.
  - diminoten 13y ago
    We could use this argument to remove warning labels from all dangerous things. If you want to drive your vehicle without a seatbelt, who am I to force you to? Your seatbelt choices have no impact on anyone else except you, right?!
    - derekp7 13y ago
      That is exactly right. Also, if I want to ride my bicycle without a helmet, or go rock climbing, or cross the street without being wrapped in bubble wrap, that is my business too. Although the seat-belt thing does have some legitimacy, in that it keeps the drive in front of the wheel during an accident, allowing him to potentially keep some control over the car.
      - anigbrowl 13y ago
        If you suffer a serious accident, it imposes an external cost on society. You may get presented with a bill afterwards, but even at the point of having the accident it's highly disruptive. Consider a car accident where you're berely inured and shaken up, v. one where you are ejected through the windscreen into the road. Which one is going to disrupt traffic for longer? keeps the drive in front of the wheel during an accident So you think passengers should not wear them?

skilesare 13y ago

Correct for now, but soon unaccredited investors will be able to invest as well....just waiting on the SEC rules on how it will work. There will be a limit per year based on income from what I understand.