

Why You Can’t Invest in My Awesome Start-Up - edw519
http://www.slate.com/articles/business/small_business/2011/10/crowd_funding_we_need_to_scrap_the_dumb_sec_rule_that_prevents_s.html

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nknight
I hate that this rule exists in the form it does, but changing it is
potentially difficult.

Accredited investors and the offerings they invest in are largely outside the
regulatory system, and it's ripe for fraud. The whole idea is that accredited
investors are (hopefully) sophisticated enough to avoid most of the fraud on
their own, without the SEC's help, and have enough resources to absorb the
losses when they get it wrong.

With a low-dollar exemption, even if an individual may not suffer significant
hardship if they make a few investments and it goes badly, it can still make
it easier for fraudsters (or just careless buffoons) to make off with/waste
large amounts of money from a lot of individuals.

I agree that there needs to be a middle ground between accredited investors
and the fully-regulated system, but getting the rules right without making
enforcement mechanisms either toothless or too expensive is going to be hard.

