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I'm not a fan of accredited investor requirements. At the same time, you're misstating the posture of the regulations somewhat. The accredited investor requirements don't directly prevent you from investing your money in particular ventures. Instead, they create an exception to the general rule that any entity selling securities to the public must register those securities with the SEC and abide by disclosure requirements.[1] The accredited investor exception is just one of several exceptions to the SEC's registration rules. The purpose of the regulations is deeper than just protecting you, the individual investor. Originally, the regulations were created because of the systematic effects resulting from selling investments to the general public. When a whole bunch of people lose their retirement savings to bad investments, it's something the government ends up having to deal with, and "it's your fault" isn't a politically tenable answer. Not to mention, when these sham investments go under, they create a lot of collateral damage. In modern times, the securities laws have been rationalized as a response to the information asymmetry that exists between sellers of securities and investors.[2] The nature of this asymmetry is that sellers have a lot more information about the investment than buyers do, and can use this advantage to systematically undermine the market. Now, and this part is editorializing, the problem with the accredited investor exception is that it misunderstands the nature of what the securities laws exist to correct. The focus on "investor sophistication" is totally misplaced. In economic terms, the relevant asymmetry is not the asymmetry is sophistication between sellers and investors. It is the asymmetry in inside information. While accredited investors are likely to be more financially sophisticated, they are not any more likely to have more inside information than members of the general public. Thus, the rationale behind creating exceptions to the disclosure requirements doesn't hold. [1] http://www.sec.gov/answers/accred.htm [2] http://en.wikipedia.org/wiki/Market_failure ("Some markets can fail due to the nature of their exchange. Markets may have significant transaction costs, agency problems, or informational asymmetry. Such incomplete markets may result in economic inefficiency but also a possibility of improving efficiency through market, legal, and regulatory remedies. From contract theory, decisions in transactions where one party has more or better information than the other is an asymmetry. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry. Examples of this problem are adverse selection and moral hazard. Most commonly, information asymmetries are studied in the context of principal–agent problems. George Akerlof, Michael Spence, and Joseph E. Stiglitz developed the idea and shared the 2001 Nobel Prize in Economics") |