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Comment by ripply | Hacker News Reader

This limit is for less financially savvy people (those who are not an Accredited Investor per the SEC) to invest money into startups. The idea is to put an upper limit on funding from mom and pop to reduce the potential harm - think the ICO bubble of 2018. During the bubble, it was almost impossible to invest in a SEC compliant ICO as an unaccredited US investor and a lot of that was due to this limit existing and putting an upper limit ($1M) on money invested by the less financially savvy. Overseas, ICOs boomed due to the lack of international regulation and there were a lot of outright scams and pump and dumps happening which US investors were pretty much barred from investing in due to SEC regulations.

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And yet the government actively encourages people to lever themselves up to 33x to buy a house (a very non-liquid asset).

Or, you can start an LLC and leverage it with credit card debt.

Both are risky, and not regulated. Even worse, the latter example is effectively the same as crowdfunding but with a population of 1. Given that most business fail in the first few years, I’d argue that the government’s “protection of the investor” is basically irrelevant.

[1] - https://mymortgageinsider.com/three-percent-down-no-mortgage...

> Both are risky, and not regulated

Mortgages and credit cards are unregulated?

* sorry, typed on a phone...

The consumer side is fairly unregulated. Consider that a home mortgage at 3% down is 33x levered, but I as an investor cannot invest in something that is 33x levered unless I’m accredited - actually, more likely a qualified purchaser - according to the SEC.

So I’m arguing the protections are really there to protect the borrower (debt) but they limit the investor (equity). In effect this is an imbalance because of the disparity in upside/downside balance.

Many "business" credit cards are actually secured personally. If the business fails to pay the debt, it falls back to the person issued the card. I know folks who found this out and had to pay off their business debts with their own funds. Credit cards companies aren't dumb.

Mortgages are secured by the property itself. Lenders use property valuations to determine the fair value of a property. If you take out 500K mortgage with 15K down, and fail to pay after a few years, odds are the bank can recoup most of the cost (barring a massive event like the 2008 financial crisis.) The risk is well understood.

If you invest in an early-stage, private company, it is secured by essentially nothing, except hopes and dreams. Often early business forecasts are so out of whack, they may as well be fictional. Private investments are completely non-liquid. There is generally no market.

You’re actually arguing my case for me. In effect, the government is protecting the lender not the investor. So why are we limiting investors’ options then? After all, a business owner can max out personal credit cards and go bankrupt. And “secured” doesn’t mean anything unless there is property or equipment behind it.

Source: I’ve worked in finance for over a decade and I run a business as an owner.

Let the idiots self-destruct. Navigating finance is fairly simple. The people who came out of the 2008 housing crash untouched were the ones who had the basic common sense to say "If I don't understand this paperwork, I'm not going to sign it."

All this regulation does is make the middleman necessary, and that is all a middleman's job is anyway.

The lack of empathy, reasonableness, common sense, or logic in this post is stunning.

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