Re: Rohit Req: A Linux lament

Jeff Bone (
Fri, 30 Jul 1999 20:33:10 -0500

Yup, this is the dreaded "SEC Accredited Investor Status." It's a bad,
bad thing. Essentially, the criteria for participating in certain
speculative investments per our friendly federal government and its
securities market SS troups, the SEC, are rather ambiguous; but they're
rougly as follows: $1M in net worth, or $500k and $200k annual income,
demonstrable for some period of time (3 years I believe.) The
ostensible reason for these rules is to "protect" naive investors from
risk. One side effect, as noted, is that in essence the most lucrative
investments are only available to those who already have money. A cynic
(as I am on some days) might think that in fact that's what the rule was
designed to do.

There were several friends-and-family folks who wanted to participate in
Activerse, early on, including a semi-wealthy engineer friend and an
uncle who owns a very lucrative landscape maintenance company in
Dallas. They neither one passed the test, for various technical
reasons. (In the case of my uncle, though he owns the business outright
and it's worth high 7 figures, it was "indirect interest" for some
reason and he only pays himself a modest salary; in the case of my
friend, his income had fluctuated with his consulting gigs and he
didn't have quite the $1M net worth.) So we couldn't --- or rather
wouldn't --- take their investment, as it opened all kinds of potential
liabilities. Thanks to these rules, we even felt uncomfortable letting
my Dad buy his pro rata in later rounds, even though he seeded the
company! (We did let him, in the end.)

What puzzles me is that this rule should effect an initial public
offering. Usually, these things concern certain OTC transactions,
private placements, hedge transactions, various options and derivatives,
and so forth. I have no idea why this should effect an IPO.

At any rate, I agree with the writer: it's his money to risk. He
should be able to enter any sort of contractual arrangement he wants.
ESPECIALLY when the value exchange is in essence simply a precedent ---
and not much of one, a few days --- to an open, presumably liquid market
for the security in question.

Everybody on this list probably has some clue that I'm not a big fan of
regulation of markets. The SEC in particular I hold in great contempt,
for this and a host of other reasons.

Anybody feel like starting a "free" Web-based stock exchange / haven
offshore, say Anguilla?