The SEC changes accredited investor definition

For a Finance Forum, why didn't this make headlines here?

Here is the full document.

In case you're just wondering what the changes to the rule are, they are roughly:

  • The SEC can designate professional certifications from accredited institutions as a surrogate for wealth --- to begin with, FINRA Series 7, 65, and 82.
  • Employees of investment funds can be accredited for purpose of investing in their employers fund.
  • Firms that are SEC-registered investment advisors may now be accredited.
  • To meet the individual standards of accreditation, households can pool wealth between spouses, regardless of whether both spouses are acquiring a security.
  • LLCs with 5MM in assets are accredited, as are family offices with 5MM in assets.
 

I think that I said this before (probably in financeabc's thread) but letting any yahoo with a 7 or 65 go into PE is almost as dumb as an assets requirement. Paris Hilton can be an 'accredited investor' under the old rules, but I wouldn't even trust her to cut my hair.

I've done research on the space. It's almost as wild-west as the pink sheets. I wouldn't want my parents, or most of the FAs I deal with, in that territory.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
 

Totally agree. Not to mention that most smaller funds won't even let their folks to invest into the fund if it means that the AUM bumps up higher out of the threshold of the strategy.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."
 

My Name is Jeff

Totally agree. Not to mention that most smaller funds won't even let their folks to invest into the fund if it means that the AUM bumps up higher out of the threshold of the strategy.

That's a completely different animal. With high conviction active you only have so many "good ideas." If you get too big, you have to begin putting money into your B and C grade ideas.  Anything 40 Act has ownership limits in a public company, and risk will typically shut you down well before that regardless of the company.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
 

I don’t think the goal is people who are going to make good investment decisions or handle money - it lets you commit funds to someone else who isn’t family/friends, so the idea is, historically, to only allow people who are capable of sustaining a loss (ie high income / assets). The new change adds people who, while maybe not capable of identifying the best investments, should be capable of understanding that any principal they commit is at-risk and they could lose it all. The point is to prevent Joe the Plumber from losing his life savings, not to ensure that only good deas get done

 

I always thought they could implement a rule that allows for people to invest 20% of their net worth or so in investments that traditionally are only reserved for accredited investors. It doesn’t make sense at all that just anyone who has money over a specified numerical figure is considered knowledgeable about risky investments. There are more risky investments that are available on the OTCBB/OTCQB that people could just as easily run into financial trouble with

 

This is a step in the right direction. I still don't understand why it's the government's job to control who can and who can't invest in what they want to. It's fucking disgusting. I have told so many friends that aren't accredited that I can't accept their funds even though they would qualify under F&F because it's not worth the time/risk/headache but I would like to make them some money etc...

Meantime idiots can invest their life into BTC or ShitStock with insane leverage via RobinHood. 

 

m_1

This is a step in the right direction. I still don't understand why it's the government's job to control who can and who can't invest in what they want to.

Private deals are are only lightly regulated and disclosure is not as robust compared to public deals.  The average person probably should not be buying private deals.  I think the government should have some role here in protecting people who know nothing about investing and who do not have the resources to tolerate large losses.  There are plenty of other ways the average person can squander their money in the securities or commodities markets, though.

 

Then why are people allowed to buy scam coin dogshit penny stocks? Look at non-reporting pink sheet listed stocks...

It’s bullshit a company has to rack up insane fees to be raped by an exchange and the SEC in order to be “ok” to invest in. 

You can burn money on stupid things like booze and cigarettes or literally gamble so how is investing in private companies any worse? 

The SEC is staffed by a bunch of incompetent cucks that want to keep their pathetic jobs and have 0 interest in streamlining the system. With the advent of modern technology listing expenses related to fulfilling the SECs bullshit requirements should have come down but they haven’t. Complete joke that makes growth equity unavailable to the common man. 

 

m_1

Then why are people allowed to buy scam coin dogshit penny stocks?

Because you can invest $50 in a penny stock and not lose your life savings.  The minimums on private deals are much higher.

 Complete joke that makes growth equity unavailable to the common man. 

This is false.  Both Reg A+ and Federal Crowd Funding allows for the average person to buy into speculative situations with limitations.  You can also just buy a small cap growth fund for like $2,000

 

m_1

Reg A+ is $$$ and makes zero financial sense vs raising from a VC once you factor in all fees. 

Expensive from whose perspective?   The company or the investor?   We are talking about the average investor.

 

Why all the monkeyshit on this sub-discussion? It seems reasonable to me. I SB'd what I could.

I'm with financeabc here though. The SEC is built to protect Joe the plumber. I can now invest in your VC. If you're legit the $10k that I might put in there won't move the needle. If you're trying to scam me then that's a nice trip to the Caribbean. I'm the guy who reads fund filings as part of my job. (god, please no prospectuses) and I'm uncomfortable in this space as something approaching a retail investor.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
 

The same SEC that washed away Joe the Plumber's entire nest egg in 2008?

The accredited limitation is what has allowed the rich to get richer, while "protecting" Joe the Plumber. Why shouldn't Joe be allowed to risk his own money and participate in the upside that the rich are enjoying so much?

"Out the garage is how you end up in charge It's how you end up in penthouses, end up in cars, it's how you Start off a curb servin', end up a boss"
 

StrapYourBoots

The same SEC that washed away Joe the Plumber's entire nest egg in 2008?

The accredited limitation is what has allowed the rich to get richer, while "protecting" Joe the Plumber. Why shouldn't Joe be allowed to risk his own money and participate in the upside that the rich are enjoying so much?

How in the world did the SEC wash away Joe the plumber's nest egg in 2008?  Show me proof that private deals have performed better than public transactions.  

 
Most Helpful

StrapYourBoots

The same SEC that washed away Joe the Plumber's entire nest egg in 2008?

The accredited limitation is what has allowed the rich to get richer, while "protecting" Joe the Plumber. Why shouldn't Joe be allowed to risk his own money and participate in the upside that the rich are enjoying so much?

WOW. If you timed things perfectly wrong and bought the S&P 500 right at the 2007 high, and sold at the March 2009 low you lost a touch under 57%, and that's with PERFECTLY BAD timing.  I saw people do dumb stuff in 2008, but even the school teachers I was talking to weren't that dumb.  Basically the only way that you lost "The entire nest egg" is if you made a leveraged bet on real estate (AKA buying a house in Florida)

Hey, I tried to post a snip of SPX from Bloomberg as my source, but it's not letting me. GRIBs and GRABs leave metadata I don't want to leave lying around here. Anybody have any advice?

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
 

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