Small Entrepreneurs Left Behind by the Accredited Investor Rule

Cato Daily Podcast

Caleb Brown

Politics, News Commentary, 424708, Libertarian, Markets, Cato, News, Immigration, Peace, Policy, Government, Defense

4.6 • 949 Ratings

🗓️ 13 January 2025

⏱️ 13 minutes

🔗️ Recording | iTunes | RSS

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Summary

Your lack of wealth shouldn't limit your investment options, but the SEC has for decades actively prevented lower-wealth Americans from making certain investments. Nick Morgan of the Investor Choice Advocates Network and Cato's Jennifer Schulp explain.

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Transcript

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0:00.0	This is the Cato Daily podcast for Monday, January 13th, 2025.
0:09.0	I'm Caleb Brown.
0:10.1	Should your net worth determine your investment options?
0:13.4	Why does the securities and exchange commission stand in the way of small entrepreneurs,
0:18.1	seeking investments from friends and family?
0:22.5	Nick Morgan runs the Investors' Choice Advocates Network. We discussed challenges to the SEC's so-called qualified investor rule
0:28.1	with Cato's Jennifer Shelp last week. Nick, if you don't mind I'm going to start with you,
0:34.2	I have an example that is always bouncing around in my head
0:38.4	whenever I'm thinking about who is allowed to make particular kinds of investments.
0:43.9	And I think about the guy who wants to start a food truck and wants to solicit investments,
1:02.0	ownership stakes in this community enterprise from his friends and neighbors and family. What stands in the way of that? Well, a big body of federal security
1:07.7	laws and more of the point here, probably the accredited investor rule
1:12.2	because he probably doesn't make enough money or have enough assets to, or his investors don't
1:16.6	make enough money and have enough assets to invest in his little food truck. And yet,
1:21.2	that's the point, right? That is the point. In fact, if you know said food truck owner,
1:26.5	send him my way because we're looking for lawsuits to file this issue, yes, that is the point. In fact, if you know said food truck owner, send him my way because we're looking for lawsuits to file into this issue. Yes, that is the point and it's preposterous.
1:34.3	So, Jen, where did this rule come from? Who is it meant to protect? And does it protect those people?
1:41.5	Sure. So this rule is, we're going on 45, 50 years old at this point.
1:48.3	It was brought into being by Congress, but it's the SEC that really put teeth behind it in the early
1:53.4	1980s, saying that individuals who do not make more than $200,000 a year or have a million dollars in net worth
2:03.0	aren't allowed to invest in certain private investments. Well, so first, those thresholds haven't
2:10.2	changed since the early 1980s. So more investors today are able to invest than were in the early
	...

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