[refurb]

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero.

You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash.

Between protecting investors and "creating a private market for the 1%", I'm thinking the first seems more rational.

[themagician]

We don't protect investors from penny stocks, which are far riskier. We "protect" investors from damn near nothing. There are some limits on day trading and options trading sure, but those start to get lifted at around $25k.

Investing in a private company that's about to go IPO is actually not that risky when compared to multitude of other investment instruments that are available.

The secondary market is private market for the 1%. That's literally what it is. Maybe that's not how it started or how it was originally sold, but that's what it is. And it's now institutionalized and part of the law.

The idea that it's about protection is just absurd. It's absurd. Are you telling me you are glad that the 1% is out there making sure that you can't invest in Facebook for $20/share? Protection? Really?

[oh_sigh]

Right...I wonder how the public would react to those "protections" if they were dropped a bit, but still out of reach for the average person. Let's say $100k in assets, not including your home and property. Now, about 15% of Americans have access to this pool. Do you think the other 85% is going to be happy about this? Right now, the way the regulations are set up, it seems like such a small minority of people have access, that it isn't worth worrying about. But $1M is really just an arbitrary number.

[angersock]

Your argument here seems somewhat reinforce the "private club" theory.

[oh_sigh]

Well, good, because that is what I was going for :) I think most people don't care about the arbitrary wealth limit on these investments because they either 1) don't know it exists, or 2) know it exists, but $1M is such a far off magical number that it's easy to think almost nobody has access to it. If the number was lower, but still high, I think people would see it for what it really is, and be upset that they are prevented by the government from using their money as they see fit, especially as it is the same government which runs the lottery and allows casinos to operate.

[JoeAltmaier]

The crash was widely construed to be because of the ignorant public essentially betting on the stock market, with resulting instability. Wise, rich investors would invest and leave their money for years at a time.

The resulting rules changes can be revisionist-history interpreted as protecting the 99%. But remember at the time, the gilded age had passed; labor reforms were in place etc (Teddy Roosevelt, 1910s) and laws such as these were under fierce scrutiny for favoritism.

Still, today it does what it does regardless of the initial impetus. And what it does is prevent most people from playing most games.

[a_c_s]

Comparing the light regulation of the past to the current strict regulation, sure the current regulation is better.

But legally anointing an "accredited investor" class based on their current financial resources clearly advantages the rich over the poor. There are other ways to protect investors without categorically denying opportunities for savvy, non-wealth individuals (and people who are currently wealthy also deserve protection from fraudsters).

[refurb]

I'm not saying an advantage isn't given to the wealthy, I'm just challenging the idea that that was the driver for the regulation.

To be honest, the gov't is kind of stuck here. Let people make their own choices and they blame someone else. "I didn't know the mortgage rate was only a teaser!!"

At least with the credited investor regulations, if they lose money, nobody has sympathy for them.

[gfodor]

Seriously, the same people who complain about "accredited investors" being a privilege of the 1% are also going to use the phrase "predatory lenders." So, which is it? Can people be tricked into bad deals or can't they?

I'm pretty sure if anyone could invest in private equity, overnight you'd see a flood of get-rich-quick ventures crop up and you'd see a lot of people lose everything.

I'm not sure if I think the current legal system is fair, but without acknowledging the huge amount of risk involved in changing it any argument against it is hard to take seriously.

[a_c_s]

You do realize there is a difference betwixt a "lender" and a "predatory lender", right?

Mortgages are sold by people in a dual advisor/salesperson role, just like auto mechanics (and doctors and plumbers...). Non-predatory lenders give people reasonable advice about what kind of mortgage people can afford, just like an honest auto mechanic gives reasonable advice to people on what repairs are necessary and don't suggest unnecessary services or repairs.

Just as sketchy auto mechanics who try to overcharge for repairs or encourage a customer to have entirely unnecessary service or repairs done, predatory lenders knowingly push people to purchase mortgage products that they cannot afford.

[refurb]

Not sure why you're getting downvoted, I think you make a good point.

You can't on one hand hold people who make bad money decisions unaccountable and at the same time say they should have access to all the high risk opportunities.

It has to be one or the other.

[themagician]

No more risk than penny stocks, options or other derivatives. Or existing "get rich quick" schemes.