On Fri, 30 Jul 1999, Jeff Bone wrote:
>
> 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?
>
> ;-)
>
>
> jb
>
>
>