
SEC Modernizes the Accredited Investor Definition - cdiddy2
https://www.sec.gov/news/press-release/2020-191
======
gojomo
These are good steps, but abolishing all wealth-tests entirely would still be
better.

There's no wealth-test that prevents a person from losing all their money in
highly-leveraged investments - from real-estate to fancy public-market
securities. (Over-leveraging into real estate is practically encouraged by
public policy.)

There's no wealth test against putting all one's cash into gambling, which can
be arbitrarily worse than even the riskiest non-fraudulent startup investment,
depending on your choice of wagers. (Official state lotteries are among the
worst games, with the most manipulative marketing - to a level of deception
that would generate lawsuits & legislation if attempted by private actors.)

There's no wealth test before purchasing legal but addictive & judgement-
impairing substances like alcohol & marijuana.

But if you want to put $5-$20K into a friend's business, or a business you
know well, the SEC makes it hard unless you're already a millionaire. It's
insanely paternalistic & economically destructive - a ghostly holdout from
some bad experiences in another era, the 1930s, when the ranges of available
information, experience, and alternative temptations were all tiny & quaint
compared to the 2020s.

~~~
mywittyname
There's a strong financial incentive for the market to engage in fraudulent
activities against investors. And the smaller the investor, the greater then
incentive.

Public companies have regulations that help prevent such fraud by requiring
things such as audits by third party accounting firms, and regulating how
these audits may be performed. Such regulations came about specifically as the
result of fraud committed by the owners and directors of companies.

Private markets don't have these regulations because the assumption is that
past financial success is indicative of financial sophistication. It doesn't
prevent fraud, but at least it helps reduce the likelihood of success.

If you start making private markets open to everyone, then there's no reason
to differentiate between public and private markets anymore. Companies will go
back to all being "private" because there are fewer regulations, then there
will be another Enron, and a subsequent shift towards regulation to prevent
another such scandal.

~~~
colordrops
It's a matter of principle though. You don't restrict the freedom of
individuals to protect them from other individuals that are bad actors. You go
hard and strong after the bad actors. What other examples of laws outside of
finance can you cite where individuals are restricted in order to protect them
from other bad actors? It's absurd and not in the scope of what government
should be doing.

~~~
alasdair_
>What other examples of laws outside of finance can you cite where individuals
are restricted in order to protect them from other bad actors?

Pretty much any consumer safety or mandatory licensing law.

Even something as simple as buying a beer - we insist that legal adults are
not allowed to buy a beer until they are older.

We insist that adults must be over 21 to buy a handgun in many states, or that
(in other states) they must show that they are sophisticated gun owners by
passing a firearms safety course.

We let people with special licenses and training (pharmacists) buy opiates
openly, yet deny individuals the right to do so without receiving written
permission.

We don't allow non-specialists to buy certain kinds of explosives, but we
allow others with credentials to do so. The same applies to all kinds of
things, up to and including varieties of river frogs (!).

We insist on documented "informed consent" for things like surgery, again to
protect vulnerable people from bad actors.

We don't let adults buy many kind of fireworks out of fear that they will harm
themselves or others, yet if someone can prove (through obtaining a license)
that they are competent, we let them buy and fire huge commercial fireworks.

In short: there are an enormous number of similar restrictions. A lot of them
exist because the previous state (no law) caused enough damage that
restrictions were added.

~~~
colordrops
Every one of your examples are of the case of protecting the individual from
hurting themselves or others. This is quite different from the question, which
is to cite a law that restricts someone in order to protect them from others.

~~~
paulgb
I agree that some of the examples GP gave don't quite fit, but their insight
about consumer protection laws is key.

Say a consumer protection law that prohibits an appliance company from selling
me a cheap heater that isn't up to code. That law restricts the appliance
company's freedom, but it also restricts _my_ freedom to contract with the
appliance company. The law is restricting _my_ freedom to protect _me_.

(Personally, I'm fond of Matt Levine's "stupid investment license" proposal,
but I would not be in favor of an "unsafe heater" license)

~~~
colordrops
But they aren't restricting your freedom. They would be restricting your
freedom if _some_ people could buy those appliances but not you. Saying they
are restricting your freedom using your example is like saying your friend was
put in jail, and thus they are restricting your freedom to hang out with that
friend, which IMHO is a bad interpretation.

~~~
paulgb
They're restricting my freedom in the sense that, in the absence of
government, I would be free to contract with the seller of the non-certified
heater.

~~~
colordrops
You are still free to contract with the seller, they are just unable to
deliver to you.

------
throwawaygh
The two big changes:

1\. permitting natural persons who have "professional certifications" or
"credentials issued by an accredited educational institution".

2\. include as accredited investors, with respect to investments in a private
fund, natural persons who are “knowledgeable employees” of the fund.

Most of the other changes fill in gaps that shouldn't have existed: expanding
the definition of spouse and adding orgs with >$5MM assets (including tribes,
family offices, etc.). YC relevant: "demo days" will not constitute a general
solicitation.

Overall a welcome change. I assume that they'll use an existing set of
professional certifications in finance, which tend to require non-trivial
self-study, so it'll probably also create a market for short educational
programs offered by accredited institutions.

~~~
bluedevil2k
Do you think "credentials issued by an accredited educational institution"
would include things like an MBA? Or even a BA in Business?

~~~
Lazare
In theory, the SEC _could_ decide to count those. In practice, that's
basically unthinkable.

~~~
gojomo
It's been discussed, so it's definitely thinkable.

And if getting an accredited-institution MBA, for tuition payments of anywhere
from $22K to $200K, after about 17 years of other education (K-12, undergrad)
isn't enough for someone to protect their own wealth from scams, what's the
point of all that credentialing, anyway?

~~~
zerkten
An MBA is not a licensure. There are overlaps between what an MBA and an
accountant may have studied, but the CPA is what gives you a license. Lots of
MBA students do not pursue financial courses beyond what is requires to pass.
They may have interests in marketing, innovation, or other areas. They can be
ill-equipped to deal with investments.

The same pattern exists for law and many other professions. There are plenty
of people with law degrees who fail, or decide to not pursue the bar exam.

~~~
gojomo
But an MBA who's a millionaire _is_ competent to do any amount of private-
investing?

And an MBA who's not a millionaire _isn 't_ competent to do _any_ private
investing, even with just a small amount of their own money?

Why should their net-worth be legally dispositive?

~~~
tick_tock_tick
The millionaire can fuck up a few times and still be fine that's the real
difference.

~~~
gojomo
Only if they're wise enough to leave themself that wiggle room. It's a binary
test, the 'accredited' can risk any amount.

So why not let anyone take a proportionate risk?

------
elamje
My biggest problem with this is that I have had multiple opportunities as a
young professional to invest in my friends’ small funds, only to be turned
away at the last minute when they decided to only accept accredited investors.

On the other hand, I could participate in sh*tcoin ICO’s, get rich quick
“courses”, and become a real estate “investor” by attending presentations at a
Holiday Inn conference room.

The law as it currently stands, does not work, period.

I’ve been prevented from investing in the funds and businesses of my high
integrity friends, while being allowed to participate in lotteries, gambling,
MLMs, ICOs, the list goes on...

I was really hoping this would be a huge announcement, but unfortunately its a
couple tiny steps towards the ultimate end goal of opening up private markets
to individuals.

Many people like to reference scams that this law helps avoid, but I call BS.

Has it limited some cons from raising money from middle class people, yes. Has
it limited a lot of middle class people from participating in areas with the
highest returns, yes.

I’ve read about several people that weren’t accredited checking the box
anyways, and no enforcement actually happens, which makes me think it’s a BS
regulation to begin with.

~~~
vmception
> I’ve read about several people that weren’t accredited checking the box
> anyways, and no enforcement actually happens

That's because it's not a prohibition on individuals as it wouldn't be
constitutional. It is a prohibition on issuers, who can face civil and
criminal sanctions while also having the entire offering rescinded
retroactively. The government effectively achieves what they were going for
either way. (A strategy to curb/steer any behavior is to regulate the
intermediary.)

So if you, the individual, want to lie and constructively get into a private
offering and be quiet like an actual wealthy investor, there is no consequence
except you might overextend yourself due to the minimum investment amount set
by the issuer.

Regarding law, the government can still place any number of restrictions on
issuers, but the current law does not work and I think it can be argued that
it "chills speech", and doesn't make sense. Always remember, the entire SEC is
a creature of the New Deal, and although this is heralded in our history
books, most of the new deal was quickly declared unconstitutional, and the
rest wasn't challenged. Here we have something that doesn't affect rich people
and they might not be aware of it, while issuers are prohibited from marketing
to poor people and poor people generally aren't aware of it either. There are
just a few upper middle class people that get to say "what the heck is this"

~~~
elamje
Good explanation of it. I’ve yet to find a single case this has actually
happened for.

I get the gut feeling that the SEC doesn’t have the audit capacity to focus on
the _likely smaller_ deals where non accredited people lie.

Please share any cases you’ve found

~~~
vmception
Thats because you are looking for the wrong thing.

Companies and individuals get fined and sanctioned for non-exempt offerings of
securities all the time all day every day.

Non-exempt means that the issuer either didn't bother to care, or tried to
comply with a registration exemption but failed. One way of failing is the
inclusion of non-accredited investors. Depending on the exemption being
leveraged.

No sanction will say “aha we found non accredited investors” it will just say
the exemption wasn't used correctly.

Sometimes its just a fine.

Sometime the sanction is proper registration and financial reporting like a
publicly traded company has to. This is often a death knell to small issuers
due to the time and expense of ongoing compliance as well as unsavory
information that deters future investment, which is why so much energy goes
into avoiding it, even in VC backed companies which now aim to go public at
the end of their growth cycle.

And in egregious cases the company and individuals behind it will have a
criminal securities fraud and wire fraud charge.

Its not _because_ a “poor person” lied. You really have nothing to worry
about.

~~~
bobwernstein
''Companies and individuals get fined and sanctioned for non-exempt offerings
of securities all the time all day every day.''

where are those published?

~~~
vmception
Some here

[https://www.sec.gov/page/litigation](https://www.sec.gov/page/litigation)

I dont think SEC reports all

All states have an equivalent agency

CFTC gets involved sometimes and there are some capital offerings and issuance
solely under its purview

~~~
bobwernstein
I checked that link but can't find a single one concerning non-accredited
investors. Can you post one? I want to get familiar with this matter.

~~~
vmception
As I detailed to the other person I was replying to, you won't find that. Try
to re-read what I wrote.

If you are looking for that you are looking for the wrong thing. If you are on
the fence about trying to qualify for a private investment because "law" its
not your problem.

But if you are issuing an investment, it definitely is your problem.

~~~
bobwernstein
I understand but then show me an example it has become a problem for those
that issuid an investment and accepted a non accredited person.

~~~
vmception
A sanction from the regulator will say that the issuer "sold to investors
without registering the security with the regulatory body" or "without an
applicable exemption", because the issuer tried to rely on an exemption but
the regulatory disagreed. Not all the reasons that the regulator disagreed
will be stated.

Sorry man, not everything that occurs and why it occurs is on Google for your
independent review. You just have to talk to people, and lawyers, and come to
an average-right conclusion.

Maybe there is some blog somewhere about someone talking about their fine from
the SEC or a case study, but its unlikely because people don't want to out
themselves like that, or typically settlements (in general, not necessarily
with regulator) bar people from talking about them.

~~~
bobwernstein
"sold to investors without registering the security with the regulatory body"
I knew you would say that, because there are countless judgements against
companies to be easily found with that exact scenario. That's actually not the
same situation as finding out a non accredited individual was allowed to
purchase a security in a private offering. And "without an applicable
exemption" is too vague and can mean anything. No way to know.

------
tboyd47
The accredited investor restriction on private equity seems like the most
anti-free-market law I've ever heard of. You're not allowed to put your own
money into a business unless the government deems you Smart Enough (c) (tm) to
do so. If the vast majority of citizens here are not smart enough to invest
our own money, then what is all the higher education for?

This change sounds like a good one but there's not enough information to know
if it will really open up any opportunities for regular people.

~~~
michaelbuckbee
This is a pretty clear Chesterton's Fence [1] example. The scams that occurred
prior to enacting these standards were massive.

If you want to look at a modern example of such things, consider the
cryptocurrency ecosystem and the many scams that occurred [2]

1 -
[https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence](https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence)

2 -
[https://twitter.com/patio11/status/1032024732214812673](https://twitter.com/patio11/status/1032024732214812673)

~~~
chrisco255
Right, but it's not the 1920s any more. We live in this highly connected,
information rich, rapidly changing world, that is fundamentally different than
the 1920s in many ways. The general public is far more savvy about
investments, risks, and bubbles in general than they were in the past. Today,
private equity tends to capture almost all of the value before a company goes
public. The crazy thing is that a foreign citizen can invest in an American
start up without any of these credentials, yet a US citizen cannot.

~~~
jcranmer
The 90's heralded a lot of optimism about the Internet's role in making
information ever easier to access. What we've discovered in the 21st century
is that it also makes _disinformation_ easier to access. And perhaps more so,
since democratization of content generation means there's fewer chances for
curators to pull disinformation.

I don't think it's easier for an average person in the 2020's to differentiate
between investments, risky investments, and outright scams than the 1920's,
were all the regulations to be waived away.

~~~
chrisco255
I think a person in 2020 is far more savvy about the risks than someone in
1920. For one, they're aware of crashes, bubbles, etc. and have probably even
lived through at least one of them. They also don't have to trust the advice
of a single broker over the telephone. The 2008 real estate bubble was driven
by the same kind of speculation that drove the 1920s stock bubble. We are
probably already deep into a stock bubble today, in 2020. And yet retail
investors can plop down tens of thousands of dollars on stocks through
Robinhood or a myriad of other apps, paying no attention to underlying
fundamentals in the business.

~~~
jcranmer
> For one, they're aware of crashes, bubbles, etc. and have probably even
> lived through at least one of them.

The Panic of 1929 was far from the first crash of the 1900s, let alone the
only large crash in history. The Panic of 1893 would have been the big crash
that everyone was afraid of before 1929, but there were more minor crashes in
1901 and 1907. Railway manias and land speculation-driven crashes litter
pretty much every decade of the 19th century. The 21st century is unusual
because it's pretty much the first time in modern financial history you make
it an entire decade _without_ some sort of recession.

~~~
smabie
Not much more than a decade, it seems.

------
zacherates
Too bad they didn't adopt the "Dumb investment certificate" [1] instead.

[1]
[https://www.bloomberg.com/opinion/articles/2018-09-24/earnin...](https://www.bloomberg.com/opinion/articles/2018-09-24/earning-
the-right-to-get-swindled)

~~~
gruez
Is there a reason why the idea suggested _just before_ the "Dumb investment
certificate"[1] can't be implemented? It can be implemented like a Roth IRA
(ie. a special account type). IRS would be in charge of keeping track of how
much "dumb money" was "spent" in total, and all the issuer has to do is ensure
the money came from a "dumb money" account.

[1] the paragraph starting with "A better approach might be to lower (or
eliminate) the wealth bar for investing in private placements"

------
johnrgrace
I'm an accredited investor. I've had a series 7 license and was in a finance
PHD program.

I've had the chance to see a lot of investments that require you being an
accredited investor. Almost all of them have had some highly problematic
issues. Most of them have a outcomes where you can lose all of your money and
there is NO WAY to get out of the investments.

What I tell other people is run away from investments that require you to be
accredited.

Seed round investments are probably the "best" opportunity BUT you have the
risks of being screwed by cap table games. A "regular" person could put money
into a startup and get really screwed.

~~~
icedchai
The liquidity aspect is key. There is basically none with private investments.
You can get in, but may not be able to get out for 5 or 10 years... or more
likely, never. For this reason alone, the average person is better off with
public markets.

------
chowells
This is great for employees of private funds and other things like that. It
makes no difference at all to the average person complaining about the
accredited investor rules preventing them from investing in sure-fire wins.

It really doesn't matter how much of a genius you are at recognizing
investment wins. If you can't give them enough cash to finance their
operations for a significant period of time, the company isn't going to be
interested in taking your money. If you can't meet the wealth guidelines,
you're not gonna be able to give them enough money to be worth their time
dealing with.

~~~
tathougies
The average person can now take the Series 65 exam for $60 or so and, if they
pass, become an accredited investor. This is a huge change. Taking the wealth
requirement from 1 million dollars to $60.

EDIT: It's not $60, but $175, still a far cry from a million.

~~~
scott00
This is likely not true. You can't just sign up for FINRA exams as an
individual; an eligible entity (broker-dealer or investment advisor) has to
sign you up. And even if you have passed the relevant exam recently enough,
you're not considered licensed unless you're working for an eligible entity
who has submitted the appropriate paperwork to claim you as a registered
representative.

The easiest path this opens for someone not in the securities industry is to
become a state registered investment advisor. In my home state of Illinois,
that would require paying $400 a year to the state and $150 a year to FINRA,
as well as subject you to a number of non-trivial regulatory requirements.

~~~
jkaplowitz
You need a sponsor for most FINRA exams, but Series 65 (and the introductory
SIE exam) allows self-registration with no sponsor.

I just reread the new accredited investor final rule, and as per footnote 102,
people who qualify via Series 65 need to maintain in good standing a state-
granted license or registration. No other requirements exist on top of that.

------
tathougies
This is a wonderful change. Before, you had to be rich to invest in funds.
Now, the SEC has opened up the ability to participate simply after having met
certain educational thresholds. The Series 65 exam can be undertaken by
members of the public, without any requirements.

Great news for small investors! And a vital change for minority and
marginalized communities, who are often forced to seek capital outside their
community, because it is incredibly difficult to meet accredited investor
requirements otherwise.

------
mthoms
Interestingly, many Canadian provinces have had accredited investor exemptions
for some time. Here's an overview for anyone interested (note that the exact
rules will vary by province):

[https://financialpost.com/personal-finance/managing-
wealth/s...](https://financialpost.com/personal-finance/managing-wealth/soon-
you-will-be-able-to-invest-like-the-very-rich-with-all-the-rewards-and-risks/)

------
bufferoverflow
This is classic gatekeeping. You can bring all your money to a casino, buy
lottery tickets, make bets on horses. But somehow investing in early stage
startups is suddenly an issue the government wants to protect you against.

------
LatteLazy
Did they really not have anything except a wealth test previously? Nothing for
people working in the industry etc?

~~~
vmception
It was a "self-certified" wealth test

People working in the industry know that self-certified means lie through your
teeth all day every day with a straight face.

People working in the industry know that you can create illiquid investments,
trade one unit of it and say you own the rest at the same price, and viola you
are a multimillionaire. I did it with crypto assets 6 years ago using
Counterparty.

People working in the industry know that you just need a lawyer or CPA to sign
off on that.

The prohibition is on the companies selling securities, not on the investor,
so the company just needs a way to cover their ass (CYA) and there is no
consequence for the investor. "Self-certification" is a code word for lying,
or stretching the truth, just checking the box.

~~~
ninetax
> People working in the industry know that you just need a lawyer or CPA to
> sign off on that.

In your experience how willing are CPAs or lawyers to do that for you?

In theory they're putting their credentials on the line for you, so I imagine
it's either hard to find ones that will do that or very expensive to the point
where it eats into the investment return with the amounts of capital being
invested below the accredited investor limit.

~~~
vmception
lol _maybe_ 10 years ago and briefly.

There have been a SaaS services for this the whole decade, and that’s only
because the issuer exemptions were expanded to even need a lawyer because an
investor saying “yeah Im accredited” wasn't good enough for some securities
issuance exemptions.

You don't lie to the lawyer (or most lawyers), you show assets. Assets which
so happen to have a value and are totally illiquid. You trade a single unit of
something you create for $1 and you happen to have 2,000,000 more units.
You’re accredited by any standard. No different than your portfolio of houses
in a place nobody wants to live in, which still happen to have appraisals
totaling over $1mm.

If that doesnt feel “right” to you then you might be confusing who actually
has the consequence here and might have been unproductively conditioned to
“follow the letter of the law” compared to the consequences and implementation
of the law. Again its a prohibition on the securities issuer which they pass
on to the investor. Its not a prohibition from the government on the investor
or the lawyer. And the securities issuer simply has to go through the motions.
Check, check and check. And the investor has to pony up the cash. If they
don’t have the $25K or $100K minimum anyway then get out. The government’s
role in this is just a redundant deterrent.

~~~
ninetax
I understand who has the consequences here.

My curiosity is about that conversation with the lawyer when you say "I traded
a single unit of something I created for $1 and I happen to have 2,000,000
more units." where something is cryptocurrency (what else could it be?).

Would most lawyers go "Yep, just another routine accredited investor check,
$200 please."

Or would most say "I'm being asked to affirm this person has $1m in assets and
in the off chance that somehow this is checked by someone I could be penalized
because I didn't do my diligence to make sure this isn't just funny money".

~~~
vmception
the latter would only happen if dubious value propositions by poor/middle
class people became too commonplace after they started complaining about
losing their money and management in private securities offerings. the company
will then double down on covering their ass by looking into who is making
complaints.

if they start predictably acting like non-accredited investors after jumping
through those hoops, then there will be more scrutiny.

right now not enough people that are actually poor jump through those hoops.
there are a lot of people liquid with $25k-$100k or can get it, that don't
make $200k/year or have $1mm in assets when not excluding their home. the
wealth requirements also don't account for cost of living by area. Some of
them jump through the hoops to get access to things they really should have
access to. The rest don't and poorer people can't because the investment
minimums so that nobody's time is wasted is too high.

------
xt00
Putting up a basic barrier to entry to people with low net-worth people causes
some people to say "if the market is sky-rocketing, why can't I get in on
that".. but the problem is whether or not you can "afford" to lose the money..
like if you have 50k to your name that you saved up over 20 years, then you
blow it all in one bad investment, then you see people doing rash things like
trying to take out their revenge on people or other super destructive
behaviors. If your annual income is high, then losing 50% of your annual
income might hurt, but you can earn it back in a reasonable amount of time..
losing say 10 years of annual income would hurt basically anybody..

So it makes more sense to have various lower risk investment vehicles that are
attached to those markets -- like if real estate is booming in your part of
the world, then it should be possible to create some kind of investment group
where 100 people put together their money and buy various properties.

Allowing people who don't know much about options to buy them in a leveraged
position is incredibly risky for tons of reasons. Many people's understanding
of options is basically like if the stock goes up, then the call option that
is above the current stock price goes up -- the option price could easily
could go down if the expectation was that it would go up even more than it
did, or the price volatility decreases! Not easy to explain all of the
horrible ways you can easily lose money in the markets... I've sometimes
thought, maybe I should just do the opposite of everything I've thought I
wanted to do.. maybe that'd be better than what I'm doing..

~~~
DennisP
What's weird is that there's nothing stopping someone with $1M from blowing it
all on a risky investment, while someone with $900K can't invest even 1% of
their net worth in the same thing. A limit on percentage of net worth
invested, as in the JOBS Act, would make more sense.

------
tempsy
They also eased risk disclosure requirements [https://www.sec.gov/news/press-
release/2020-192](https://www.sec.gov/news/press-release/2020-192)

It's honestly laughable that their top priorities in the height of what
appears to be a massive stock bubble is weakening investor protections at a
time when they should be strengthened

------
Animats
Most of the changes involve organizations, not individuals. The main change
for individuals is that having a Series 7 qualifies you. (A Series 7 is a test
about finance you take to become a broker. Covers stocks, bonds, options,
terminology, how to evaluate risk, trading rules, ethics. that sort of thing.)

Mostly, this is about hedge funds, not startups. "Accredited investors" can
invest in hedge funds that don't report their returns publicly in a standard
way. Usually they don't report them because hedge funds as a class
underperform the Dow.

Useful rule: any investment where they call you is no good. If it needs paid
salespeople, it's a dud.

------
say_it_as_it_is
Note that the process of reforming equity fundraising began at least ten years
ago as the JOBS Act was drafted. Powerful financial lobbying watered down
provisions, such as the designation of accredited investor and anything else
that would enable a viable crowdfunding marketplace to exist. After TEN YEARS,
across several political administrations controlled by both political parties,
this change finally takes a baby step forward. It's still not democratizing
access to private investment. The reasons for this remain the same: those who
control the flow of capital demand it.

------
sfshaw
Matt Levine would be having a field day today. I hope he's having a nice time
off.

------
bobwernstein
Do international investors in a USA based startup need to be ''accredited''
acording to SEC rules even if their own country allows them to invest freely?

------
laser
Would the easiest way for someone that doesn't meet the wealth or multi-year
income thresholds to become an accredited investor now be to take the Series
65?

------
cryptica
Great, now that all the valuable companies have done their IPO and the stock
market is about to collapse, let's allow the peasants to come in and buy all
our bags of crap before they become worthless.

It's all for their own protection of course. We really care about the
peasants. Especially when they bail us out.

~~~
renewiltord
The "peasants" don't have to buy anything, dude. I know friends with all their
money in bonds, metals, and Vanguard. No one's making you go by TSLA 4500
calls expiring this Friday.

~~~
cryptica
They don't have to, but they will, now that we finally allow them... At this
very convenient time.

~~~
renewiltord
Let them do so, then. May we all be free men, acting for ourselves, not slave
to the whims of states.

------
aerovistae
Looking over it, it seems like it's still highly restrictive.

------
peter303
16% of the US qualifies. Not a very high threshhold.

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elevenoh
Hope Canada similarly updates their definition !

------
throwawaypop
Am i the only one who thinks we are not giving credit to Trump administration
for more de-regulation specifically this one? Relaxing the regulation to be
fair.

~~~
edoceo
Rule 14 ^^

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zelly
Seems like a top signal.

------
ffggvv
wtf is a natural person?

~~~
tathougies
A natural person is an individual human being, rather than a corporation, the
estate of a deceased individual, a trust, a partnership, etc, which are all
legal persons, but not natural ones.

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obiefernandez
Someone have the TLDR?

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mindcrime
Hilarious. I'm not sure how any of this counts as "modernizing", and none of
it amounts to any substantive change. I'd compare this to rearranging the deck
chairs on the Titanic, but doing that is probably more productive.

So... now people who hold a couple of niche, finance industry specific
licenses - _which you can 't obtain unless you work in the finance industry_
\- can be "accredited investors." Wow, golly gee whiz, color me gobsmacked.

So finance industry insiders get more access to opportunities to build wealth,
and nothing changes for regular old everyday Americans? Am I supposed to be
impressed by this?

The ONLY way this would actually be worth trumpeting would be if anybody could
study, sign up for, take, and (hopefully) pass the various FINRA exams
mentioned, and get their license without needing to go to change jobs. But,
sadly, as we see here[1]:

 _Candidates must be associated with and sponsored by a FINRA member firm or
other applicable self-regulatory organization (SRO) member firm to be eligible
to take FINRA representative-level qualification exams._

and here[2]:

 _In order to enroll for FINRA qualifying exams, a candidate must be sponsored
by a state regulator or regulatory authority approved to sponsor candidates
for FINRA qualifying exams._

Edit: there is some verbiage here[3] that claims that you can take the Series
65 exam without being associated with a member firm. IF true, I might change
my opinion on this a bit. But this seems to contradict what is on the FINRA
site itself.

 _Unlike many other FINRA Series exams, the Series 65 exam does not require an
individual to be sponsored by a member firm. If you are not Form U4 registered
or affiliated with a firm through FINRA’s Web CRD system, you should use the
Form U10 to request and pay for the Series 65 exam._

[1]: [https://www.finra.org/registration-exams-ce/qualification-
ex...](https://www.finra.org/registration-exams-ce/qualification-
exams/series82)

[2]: [https://www.finra.org/registration-exams-ce/qualification-
ex...](https://www.finra.org/registration-exams-ce/qualification-exams/enroll)

[3]: [https://www.kaplanfinancial.com/resources/career-
advancement...](https://www.kaplanfinancial.com/resources/career-
advancement/how-to-get-your-series-65-license)

------
CalChris
So these are 'smart' people who somehow can't meet the relatively low
traditional income requirements ($200k/yr) but who are now assumed to be
financially sophisticated enough to take on the risk of these securities
without the protection provided by normal regulatory disclosure filings. This
strikes me as insanely stupid akin to the ownership society nonsense which
precipitated the housing crisis.

VC follows a power law and the vast majority of these investments will fail.

~~~
nrmitchi
> relatively low traditional income requirements ($200k/yr)

$200k/year may be "relatively low" in certain areas, but it borderline
unattainable in many parts of the country.

People can be smart, and perfectly capable of understanding the risks with
offerings in their own industry, without making 200k/year. Don't automatically
discredit people with airquotes based on their salary alone.

There are also many people who make more than $200k/year who are, quite
frankly, not "financially sophisticated enough to take on the risk".

~~~
topkai22
Yeah, the $200k/year threshold excludes something like 97% of individual
income earners ([https://dqydj.com/income-percentile-by-age-
calculator/](https://dqydj.com/income-percentile-by-age-calculator/)). That's
not relatively low, its a significant barrier to entry. Worse, a $200k income
in SF or NYC (where an outsized portion of those income earners live) is a
different beast when it comes to disposable income if compared to Johnson
City, Tennessee.

Matt Levine has it right- just peg the total amount of investments in these
sorts of vehicles to 10% of cash, stocks, and bonds, until the investor
crosses the $X million dollar mark.

~~~
CalChris
Yes, it is a significant barrier to entry. That is its purpose.

Upper-income households (double the national median) account for 20% (side
note: yeah, we have a yawning wealth gap). Those household incomes are
$207,400 in 2018. So I'm not going accept your 3% number.

[https://www.pewsocialtrends.org/2020/01/09/trends-in-
income-...](https://www.pewsocialtrends.org/2020/01/09/trends-in-income-and-
wealth-inequality/)

~~~
vonmoltke
>> 97% of _individual_ income earners

> Upper-income _households_ (double the national median) account for 20% (side
> note: yeah, we have a yawning wealth gap). Those _household_ incomes are
> $207,400 in 2018. So I'm not going accept your 3% number.

You are comparing two different things, so your objection is invalid.

Also, as noted elsewhere, part of this change was to expand what incomes in
the household count towards the accredited investor threshold. Some number of
those households didn't qualify because some portion of their household income
didn't.

