So, I did some research and here is my understanding of why this rule is bad. The SEC requires any company that wants to sell shares to register with it. There are exceptions to this registration requirement. One of these being that a company is exempt if it sells shares to an "accredited investor".<p>The definition of "accredited investor" since 1982 has been someone with a net worth of $1 million or $200K annual income or $300K combined income with spouse.
<a href="http://www.sec.gov/answers/accred.htm" rel="nofollow">http://www.sec.gov/answers/accred.htm</a><p>By changing/increasing the "accredited investor" threshold, presumably less people would be able to invest in startups that are not registered with the SEC. Hence this rule would lead to fewer angels. BTW, the change being proposed is that an investor cannot include his primary residence in calculating his net worth.<p>More history of the "accredited investor" rule can be found here - <a href="http://webster.utahbar.org/barjournal/2010/11/the_evolution_and_future_of_th.html" rel="nofollow">http://webster.utahbar.org/barjournal/2010/11/the_evolution_...</a><p>[EDIT] Here is a rationale for the existence of the "accredited investor" rule taken from the utahbar link above:<p>Since as early as the 1930s, regulators and courts have struggled with how to protect individual investors in private offerings of securities while still allowing sufficient investment in private offerings to sustain the growth of start-up and other young companies – companies which have historically been responsible for much of the job growth in the United States.<p>Eventually, the Securities and Exchange Commission (“SEC”) came up with the idea of “accredited investors.” Accredited investors are individuals or other entities that have sufficient wealth not to need the protection of federal and state securities laws to the same extent as non-accredited investors.
This post is pretty weak. Neither metmorphblog nor the lawblog explain what this rule means. They both declare it as bad. But why?<p>So what if 'accredited investor threshold' is raised? Will angels not get to make investments? Will they have to pay higher taxes? What is the intent behind raising this threshold? Will it stop someone from starting a ponzi scheme?