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Comment by tibbon | Hacker News Reader

Too bad laws don't have functional test suites to run against changes to see if there are side effects and if the rest of the 'code' still works.

Just so I understand: If I've got 250K in the bank- this would prevent me from doing 10K ycombinator style investments without jumping through massive SEC hoops?

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It's not quite that black and white: essentially, the laws around "accredited investors" are there to clearly delineate professional investors from more casual investors so that the person receiving the money can be sure that it will count as a private placement exempt from SEC registration requirements. That, in turn, is to prevent scam artists from inducing people to part with their money by "investing" in a private investment that's totally free of SEC registration and oversight. If you wanted to invest in your friend's startup, you could, but if you wanted to fund other third-party startups with which you had no pre-existing relationship, you'd need to register as an accredited investor.

See grellas's excellent summary from a few days ago:

http://news.ycombinator.com/item?id=1221387

As absurd as it seems, laws like this don't come out of nowhere just to make people's lives complicated and miserable: the SEC registration requirements are there to prevent scam artists (of which the 20th century that saw rise to these laws saw plenty), and the accredited investor regulations are a way to clarify the exemptions to those requirements.

I think that works well in theory, but as we've seen from Bernie Madoff's case, where the SEC keeps ignoring pleas from whistleblowers to look into the case (because the fox is guarding the henhouse) and the fact that no reform in SEC has been made to this day, that that is not the case.

As an aside, I think most people on this board have a 'everybody is decent and nice' goggle on. Probably why we're the ones getting ripped off by everyone else.

Well, no. If you've only got $250K in the bank you already can't invest. The current requirements are $1 million in assets or $250K annual income. This will move that bar up by about 2X.

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