[sokoloff]

IMO, the SEC accredited investor rules are in place to make it a federal crime to scam non-accredited investors. Though I tend to be anti-regulation in general, I think these are good laws as I can only imagine how many investment scams would be running otherwise.

[CryptoPunk]

They make it a federal crime to offer securities to non-wealthy people. Characterizing all such offers as scams is a prejudicial over-simplification, and the kind of sweeping and presumptive generalization that rationalizes repression.

[sokoloff]

No, they made it a federal crime to offer non-registered securities to non-wealthy people.

Registered securities (stocks, bonds, mutual funds, etc.) are widely available to non-wealthy people and are probably a better investment for most of them, frankly, because of the concentration of risk inherent in a small dollar portfolio of non-registered securities and the idea that registered securities will have some standardized reporting requirements and that one could rely on the market to do a certain amount of due diligence and price discovery.

[CryptoPunk]

Non-registered securities are those that are issued by any company not worth over something on the order of $100 million, since any company smaller than that cannot afford to get their securities registered.

Anyway, this distinction doesn't change my point: offers of such securities to unaccredited investors are not categorically "scams". This kind of critical reductionism is reckless to individual rights and liberty.

[gamblor956]

Companies can get registered fairly cheaply; a company with almost no assets or value could do it.

The expense comes from meeting the requirements to be registered on a large exchange like NYSE or NASDAQ (both of which are non-governmental entities). This is why small companies that have public stock are traded on "penny" exchanges.

[CryptoPunk]

Fair point. There are the OTC exchanges.

In any case, I don't see any mom and pop shops offering their customers stock. There are only 10,000 companies with stock on the OTC market, out of 30 million in the US.

[Veelox]

I think you are being uncharitable to the point they made. Since there are accredited investors, if a bad guy tries to talk an un-accredited investor into buying into a dressed up Ponzi scheme it is a federal crime and thus can be investigated and treated as such. The goal of this is to keep main street investors safe. Yes, it does put some limits on individual freedom but I think this is one area where the trade-offs has been chosen decently well.

[CryptoPunk]

No, anyone that offers an unregistered security to a non-wealthy (unaccredited) investor is committing a federal crime. It's disingenuous to ignore the full scope of the law, by not mentioning how it criminalizes certain classes of victimless interaction.

>>Yes, it does put some limits on individual freedom but I think this is one area where the trade-offs has been chosen decently well.

This is Big Brother ideology. No one in a free society should have their freedom restricted.

The practical results of this paternalism have been disastrous too, so it can't be justified on consequentialist grounds. Practically all small businesses are denied direct access to public capital markets atm.

That's probably trillions in lost economic gains and potentially a massive contributor to income inequality.

When you create gatekeepers, and prohibit anyone from transacting without their intermediation, you create a concentrated power structure that inhibits economic development and exacerbates income inequality.

The new crowdfunding rules are a tiny step in reversing this dire situation, but the real solution is to stop treating the adult population like children that need to be protected from their own bad judgment.

[hndamien]

Nothing stops an unaccredited investor betting the farm on Enron. If there is a less perceived risk, people will use more leverage. So all of this "protection" just amounts to restricted opportunity.

[sokoloff]

Several people went to federal prison and Arthur Anderson went out of business over the Enron shenanigans. This seems as much a deterrent as the Securites Act of 1934. If you’re willing to risk federal prison, you can solicit non-accredited investors for unregistered securities.

[hndamien]

You are missing the point. Insert any publicly listed stock that tanked. How about a nice safe bank, like Lehman brothers?