[bsder]

> The stated mission of the SEC is "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation."

The problem with small investors is that it is really damn hard to bring a CEO doing obviously fraudulent things to heel. It takes a significant fraction of a million dollars to bring a successful lawsuit--and what you get in the end isn't worth much.

The SEC needs to be much more vigilant on this front if they want to increase the investor pool significantly.

[kenneth]

The lawsuit isn't worth it for large investors either. It's much easier to write off your investment than to try to spend a ton of money and energy fighting for scraps, nuking your reputation as a founder-friendly investor in the process. That's why VCs suing portfolio companies is so rare. Only major case of recent memory is Benchmark and Uber, when a $10B+ position was at stake.

[briandear]

> it is really damn hard to bring a CEO doing obviously fraudulent things to heel.

If it’s “obviously” fraudulent, why isn’t law enforcement involved? No lawsuit required since fraud is a crime.

[bsder]

They could. But the FBI, SEC and IRS probably won't move unless you present them with an absolute slam dunk worth $5 million or more in direct penalties. If you're below that range, you're probably going to have to file a civil lawsuit. And, after your win that, one of the TLA's might pay attention.

This is a problem if you genuinely want more small companies funded by more small investors.

If the SEC doesn't figure out how to police the $1-$5 million range of companies, all they are doing is creating a nice fertile ground for conmen.

[qtplatypus]

Because "obvious" might not rise to the level of "beyond reasonable doubt".

[bsder]

Monetary penalty cases generally are "preponderance of the evidence".

"Beyond reasonable doubt" is generally only when jail is involved.