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Comment by cantankerous | Hacker News Reader

I've been a bit out of this loop, but what kinds of protections remain in place to protect small investors from hucksters "starting a company"? Is it pretty much caveat emptor or is there stuff not mentioned in this article?

I think this approach is pretty cool, but there are these drawbacks. Are there going to be limits, protections, or restraints? Is the solicitation still only limited to qualified investors or how does this work?

EDIT: I see I missed that the article says "qualified investors", but I'm still not sure if that's the legal term or a more loose term.

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There are no new protections for accredited investors. To be accredited you need to either have over $1m in net worth (excluding your primary residence) or have earned an income of $200k/yr as an individual (or $300k/yr as a joint couple) for the past two years. The philosophy here is and has been: if you're wealthy then you can probably take care of yourself.

The last remaining piece of the JOBS act is Title III, the part that allows non-accredited investors to invest. There are protections for this class of investors, including income-based limits (you can't invest more than 5%-10% of your income a year) and it requires investments to be made through a crowd on a crowdinvesting platform. The SEC is still working on the exact rules and regulations for this.

To amend: two new rules were proposed as investor protections. They will have their own comment period and may or may not be adopted. They are:

    - Companies need to file with the SEC 15 days prior to generally soliciting.
    - Companies need to provide additional information about the offering.

I'm assuming that qualified investors means accredited investors. SEC definition here: http://www.sec.gov/answers/accred.htm

That's correct. I changed the post to say "accredited" - thanks!

Okay I get it. That was my hangup. Thanks!

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