Take for example the "qualified investor" in the U.S. To be qualified you must have a million dollars and expect to make 500k this year. How insulting is that!?! It implies that the poor are to stupid to invest their own money and that just having money shows how smart you are. The system is rigged to keep normal people from investing and living off of capitol gains, exactly how the rich make their money.
The point of identifying who a "qualified investor" is isn't to exclude poor people from investments, it's about identifying a situation where there are no investors the SEC needs to protect. There are certain securities or transactions that don't need to be registered if they deal with only qualified investors. The point is to identify a transaction that doesn't need SEC oversight or registration since a "qualified" investor is deemed to have the experience or resources at his disposal to figure out for himself if the deal is legitimate or or not. It's true the SEC equates financial sophistication with wealth or level of income, but that doesn't seem to be an unreasonable correlation to me. The question comes down to financial sophistication, and the SEC has decided that the rich are more financially sophisticated than the poor, and are able to better understand the risks of investing in an unregistered security, which is riskier than a registered security. To a lesser extent, this identifies situations where the government doesn't need to get involved so it can lessen its regulatory burden, but it's mostly about situations where the government doesn't have to oversee or register the securities because everyone involved can take care of themselves.
I see what your saying but the implication that having wealth equals financial knowledge is false. If one were born mentally challenged but a millionaire he/she would qualify while another person with an advanced degree in economics will not qualify if they are not rich. The only reason why this law exists is to protect the wealthy from normal people entering into investments.
Why for example can't a normal person invest $500 in a startup? Even if their poor stupid self invests unwisely, they wont go broke. And there is nothing to keep a wealthy person from investing in a ridiculously bad option. It is not about protecting anyone. It is about the fact that the wealthy do not work for a living, they invest. If everyone could do that then the rich would face competition from the people who are supposed to be busy making them money.
I understand your first point, and I agree that wealth is not the same as financial knowledge. It's just the easiest way to draw the line. I disagree with the intent of the rule though. It's not to protect the rich, it's to protect the
not rich. The reason the SEC is necessary is because people take advantage of other people. The SEC regulates investments to hold accountable people who would defraud investors. The reason they don't let the non-rich invest in the riskiest types of securities is they can least afford it if the venture fails, and far, FAR more of them fail than not.
It would be one thing if people accepted responsibility for themselves when they invest in a company that goes bust, but they don't. The public has demanded "protection" from people who would structure deals in a way so as to take advantage of the financially less sophisticated, so the SEC has arbitrarily decided that level of wealth equals sophistication. From the SEC's perspective, alhough I disagree with the method of implementation, I agree with the intent of the rule, which is to keep less sophisticated people from biting off more than they can chew or being taken advantage of. From the perspective of personal responsibility and freedom, I disagree with the rule on principal. I think people should be free to invest in whatever they want. With that type of system though, the instances of fraud will be much higher. It's just a question of whether the trade off is worth it.