4 ms·
Indeed, I don't see anywhere else that Americans accept a "wealth test" to exercise a basic economic right (ownership of production). Note, the accredited-inv
by gojomo 13y ago
Indeed, I don't see anywhere else that Americans accept a "wealth test" to exercise a basic economic right (ownership of production).
Note, the accredited-investor rules are not an "ability-to-pay" test. That would be fair: if you can write the check, you're in.
The rules also are not a creditworthiness test: they don't evaluate reliability, and investors want to give money, not take it from others.
And they're not a competence test: you can be credentialed to professionally handle others' investments and businesses (through things like passing the bar or "Series 7" or CPA exams), or otherwise have degrees in law, technology, and business... and still not pass the same "accredited investor" wealth standard that any dolt who inherits a million dollars does, automatically.
The distinction ought to be abolished as a matter of basic fairness.
- refurb 13y agoThe reason for the accredited-investor regulation was to prevent people from putting all of their wealth into risky investments they know nothing about and being left destitute. People on HN are pretty smart, but it's not representative of the entire population. People get scammed by ridiculously obvious scams. Do you really think they have the ability to invest in a start-up in an intelligent way?
- shiftpgdn 13y agoI know it's a bit of a libertarian viewpoint but it is not the government's job to be my nanny. If I wish to throw all of my money down the toilet on some hopeless start-up I should be allowed to do so.
- EpicEng 13y agoI would tend to agree in spirit but, of course, no one wants to throw their money away, they get tricked into doing so. Government does have an interest in the livelihood of its citizenry.
- deleted 13y ago[deleted]
- refurb 13y agoIn a perfect world, it would make sense to let people tell everyone "buyer beware". However in reality, some people do need protecting and the easiest way to do it is to "protect" everyone.
- icelancer 13y agoAnd Las Vegas exists for what reason, then?
- WalterSear 13y agoDo you want to live in a country where other people can do equivalently stupid things and you have to deal with the consequences? No man is an island - some people are better making a burden of themselves than others.
- albertop 13y agoWe should have a rule that prevents people quiting thier perfectly sensible jobs to work on startups. They are risky as hell and when fali founders are burden to society.
- deleted 13y ago[deleted]
- saraid216 13y agoThis makes sense when the only actors involved are you, the start-up, and the government. In such a case, I would agree with you. To explain why such a case does not exist, I'll ask you this: Why is the most important piece of information Kickstarter shares with you the amount already pledged? You can see this in their page layout and in their various widgets.
- chrismonsanto 13y ago> The reason for the accredited-investor regulation was to prevent people from putting all of their wealth into risky investments they know nothing about and being left destitute. Perhaps limit the amount that can be invested without accreditation?
- wwweston 13y agoPro: few people are likely to get scammed out of life-damaging amounts of money. Con: might lead to a system where some scammers are skimming small amounts from large numbers of people, but not causing enough pain to do something about it.
- modeless 13y agoNobody becomes destitute after funding a failed Kickstarter project because the amounts are small. That doesn't need to change. Limits could be in place. What needs to go is the $1,000,000 threshold for getting any equity at all.
- EpicEng 13y agoThe grandparent was explaining why these laws exist in the first place. Yes, perhaps they should change to accommodate new modalities, but that doesn't happen quickly (nor should it.)
- gojomo 13y agoThen why aren't there limits on lottery ticket purchases, or casino gambling, or making highly-leveraged real-estate purchases, or buying any number of other investments (including public stocks and options) that can send any initial amount of money to zero, quite rapidly? It's an archaic set of rules, from a dumber era, and totally out-of-sync with what people are capable of, and what real risks to "all of their wealth" exist today.
- refurb 13y agoWell, for lottery tickets and casino gambling, people understand it's gambling (a game of chance). If someone came up to you and said "Give me $100K and I'll double it by the end of the year by gambling" nearly everyone will think "that's high risk!". You can lose all your money doing real-estate deals or buying stocks, but those are regulated financial activities. Basically the gov't is saying "I don't want just anyone buying a private company, but I'm OK with allowing them to purchase equity in a public company because those companies are forced to be transparent." Note: I'm not defending the law, just trying to explain the rationale for it.
- tim333 13y agoApparently historically many of the rules came about during the early 20th century US oil boom. Guys used to go door to door selling shares in can't go wrong oil stocks and then not only did some wells not work but often there were no wells at all and the insiders just stole the money. There was political outcry so laws were passed to stop selling direct to small investors. The rational to allowing wealthy investors to punt is that a) they can afford to lose, or at least do so quietly without causing a political stink, and b) can afford professional advice and get their accountant to have a look and so on. Investor protection laws are still useful - there are plenty of scammers out there - but I think could be updated. For example the government could have lawyers and accountants at least check out the money was being invested in a business and not just paid out to the insiders. In the UK we have some equity crowd funding which seems to kind of work.
- anigbrowl 13y agoThis has been explained to you about 100 times already, why not start with your best argument instead of pretending the question has never been asked before? For the record I support raising equity through things like Kickstarter and lowering the accreditation threshold for small investments, but you're being extremely disingenuous here.
- guiomie 13y agoThen why aren't pink sheets and over the counter stocks not banned also ?
- refurb 13y agoBecause you need to buy them from a regulated seller (stock broker).
- gbelote 13y agoThe rules are indeed a little ridiculous, especially when juxtaposition against gambling. The distinction is in the process of being removed with the JOBS Act. It was signed into law in 2012 but the SEC has been slow to enact the regulations. Hopefully it can be used to support the future Oculuses! (Occuli?)
- jiggy2011 13y agoThe difference is that gambling firms usually aren't allowed to advertise by promising a positive expected ROI.
- humanrebar 13y agoSo you're saying there's a technical solution to this problem and the $1M threshold isn't necessary.