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It's a test that's defined by law [1], ostensibly to protect the non-wealthy from being scammed easily. [2] AFAIK, the intent is to prevent scammers from direc
by drone 13y ago
It's a test that's defined by law [1], ostensibly to protect the non-wealthy from being scammed easily. [2] AFAIK, the intent is to prevent scammers from directly selling highly risky investments to the average Joe without explaining to them the complete depths of the risk.
[1] http://www.sec.gov/answers/accred.htm http://www.sec.gov/answers/accred.htm
[2] http://www.institutionalinvestorsalpha.com/Article/3214072/SEC-Commissioner-Walter-Says-Accredited-Investor-Standards-are-Too-Low.html http://www.institutionalinvestorsalpha.com/Article/3214072/S...
- fragsworth 13y agoYeah, well, it also fucks over an intelligent but average-income Joe from being allowed to invest in deals that have as high of a return. For instance, I know right now that I'd like to invest a chunk of cash into several VR companies. I can't, though, because I'm not accredited. I have to wait for their IPOs, which will happen way after everyone already finds out how much it's all worth.
- drone 13y agoWhat is the average rate of return for LPs in VC funds?
- pfisch 13y agoThe good of accredited investor laws far outweigh the bad. People who don't have a lot of money are much more likely to not have good money management skills than people who are able to hold on to lots of money for long time periods. Without accredited investor laws you would just pour tons and tons of dumb money into the system and the volume of scams would go way up. This is not to say there are not rich people being conned, but when that happens it often does not bankrupt them because they are less likely to go all in on a single asset. Something people with poor money management skills want to do all the time.
- gojomo 13y agoTrue scams aren't much slowed by accredited investor laws. Scammers just move into the areas - gambling, real estate, amateur high-frequency-trading, under-the-table offerings - that escape SEC control. And people with poor money-management skills can already put all their money into legal things that go to zero - like lottery tickets or leveraged real-estate or Enron or pre-reorganization GM. And, 'dumb money' mainly gets smart by trial-and-error, and observing the lessons of peers. Locking all non-millionaires out of private investing prevents that process from even starting.