The Federal government regulates who it will permit to invest in private investments—startups, pre-IPO opportunities, loans to private companies, and the like. These are highly risky investments, and they have high payoff possibilities, even if those possibilities are low. The Feds limit those who it permits into these private opportunities to folks with $1 million in net assets, not including their primary home residence, or at least $200,000 in yearly income, or $300,000 for a joint household.
Now there’s a move afoot to add a government-regulated glorified intelligence test as an alternative path for investors to make these investments.
A group of lawmakers has proposed legislation that would allow any investor capable of passing an exam to buy private securities—an array of investments like shares in pre-IPO startups or loans to private companies that are considered riskier because they have looser disclosure rules than public securities and can be harder, and sometimes impossible, to sell in a pinch.
Passing an exam as a prerequisite to being allowed to invest in a class of securities—passing an exam as a prerequisite to being allowed to vote in an election. That Jim Crow era requirement has long since been done away with. Except now Congressmen want to revive the practice for investing.
Private securities—meaning outside the scope of government regulation. This is something far too many politicians can’t stand; it limits their power to dictate to us; it limits their power, period.
The idea is that the ability to make these high-risk, high-reward bets should be open to all sophisticated investors, not just those with the biggest bank accounts.
Of course the definition of who’s sufficiently sophisticated, the definition of “sophisticated” itself is carefully left to government personages.
Patrick Woodall, Americans for Financial Reform‘s Managing Director for Policy (AFR is vehemently pushing for even more government regulation of our financial decisions):
Knowledge cannot protect people from the potential losses if they invest in risky, opaque, and illiquid, private offerings[.]
Neither can government. Nor should government try. The decision to run those risks are ours alone.
This is nanny-state-ism intruding into us private citizens’ own affairs far beyond regulation of public company-related investments. Companies are private rather than publicly owned explicitly to get out from under the government’s thumb, and citizens invest here—or would if we could—explicitly to stay out from under the government’s thumb—especially when that thumb operates, according to government, for our own good.
No.
We average Americans do not need government protections from ourselves. We are fully capable of making our own decisions, and we are fully capable of handling, and fully and responsible for, the outcomes of our decisions. We are not wards of the state, much as one of our major political parties is bent on reducing us to that condition.
