July 20, 2014
I agree with the comment submitted by Kiran Lingam at SeedInvest on July 8, 2014 available at http://www.sec.gov/comments/s7-06-13/s70613-546.pdf that raising the accredited investor thresholds would be disastrous for startups, job creation and the U.S. economy. I believe the SEC should refrain from increasing these thresholds and should also adopt knowledge/experience based standards for an individual to become an accredited investor.
As someone who has on two different occasion raised money through a private offering and is also an accredited investor (and would remain so under the new rules), I have firsthand experience in dealing with the current cumbersome system and also understand how such an increase would drastically decrease the amount of money available to start ups. A fair amount of our investors would be eliminated if the rules are changed as proposed and we would thus be out of business.
As further analogy, I was an accredited investor prior to 2008 but by the end of 2008 I had a negative net worth. Did this make me less able to understand the risk and returns of an investment? To the contrary I was far more educated after going through that experience than I was prior to that experience, and yet I was unable to act in the capacity of an accredited investor for several years while I worked through the mess and rebuilt my business.
Lastly (and as referenced above), both the current and proposed accreditation systems are unfair to non accredited investors in that the returns available through private investment are often far in excess as those available through traded securities and also don’t come with the plethora of fees associated with so called wealth managers. I understand there are risks with private placements but these risks are usually more associated with the quality of the person acting as the sponsor as opposed to the quality of the investment itself. By having a test that someone could pass to become accredited it would give smaller investors (teachers, janitors, etc) that are willing to become educated the opportunity to invest as the same opportunities as are available to the rich. Currently the system is designed so that the rich become richer and the poor are limited in their options until they find some way to become rich other than investing. This is against what America stands for as the supposed land of opportunity.
Best Regards,
Forrest Jinks