Why shouldn't mom-and-pop get the choice to invest in SEC regulated companies? If you like what the SEC has to offer, you can keep it. Taking away that choice seems paternalistic at best, corrupt at worst.
When retail, i.e. unaccredited investors, get hurt (a) there are more of them and (b) it more often than not puts them into dire, sometimes existential, straits. The latter leads to political backlash and instability, e.g. the 1930s.
Basically, you must have a nest egg to act as a safety cushion before you can invest in risky things. This makes sense on another level, in that doing diligence on un-registered companies is expensive. That, in turn, drives a minimum practical investment size.
All these regulations do is drive up the cost of directly accessing public capital markets (at last count, $6 million to do an IPO), and contribute to growing income disparity [1].
[1] https://www.brookings.edu/research/make-elites-compete-why-t...
There's a fair argument in weighing the upsides and the downsides of registration requirements. But saying the downsides are "all these regulations do" is intellectually dishonest. Lots of scams get stopped, or at least quarantined, by these regulations. The speed with which the ICO market went from zero to bullshit only seems to re-inforce the prudence of these rules.
> $6 million to do an IPO
Having watched private companies spend much more than that to raise private capital, I think it's safe to say filing fees aren't the primary problem the public markets have.
But fair enough: if you constrain this new internet sector, then you could conceivably reduce scams, just by virtue of forcing people into higher-friction areas of the economy, where less can practically be transacted. I'm sure Cuba has pretty low scam volumes by the same virtue.
>Having watched private companies spend much more than that to raise private capital, I think it's safe to say filing fees aren't the primary problem the public markets have.
Many private companies spend FAR less than that to raise private capital. To claim that a $6 million fee for entry is not going to disenfranchise a huge subset of the population is intellectually dishonest.
I mean, maybe?
An investment of money, managed by somebody else, with the expectation of profits. I feel like that covers most things we would typically consider to be investments. Aside from something like, "I bought this piece of art... as an investment." Maybe I'm just missing some obvious examples?
A Reg D offering is however limited to accredited investors. With Reg D the SEC is basically saying "We won't require as much disclosure from you, but you'll have to raise money from a more sophisticated investor, ostensibly."
Edit: spelling
Obviously if it was not actually positive then not having the choice is pretty crappy.
In environmental regulations, we had the Love Canal which exposed a lot of school children to toxic waste. The market failed, we responded was CERCLA and the EPA.
In the case of securities regulation, the market failure was a big one in 1929. We responded with major legislation in 1933. And in general, that legislation has been a rousing success. But it's important to note that the goal of security regulation, of preventing crappy investments, isn't just to protect mom-and-pop, but also to prevent against another 1929. In my mind, it's really hard to argue that the effect of US securities regulation hasn't been a net positive.
I guess my point is that market forces prevented bars from being smoke free, and what you suggest would lead to basically no SEC regulated investments.