I don't know what "class lock out" means, but the restriction is pretty obviously there to prevent people from staking their livelihoods and financial futures on unvetted offerings.
The idea is that people who have high incomes or high net worths (a) either are financially sophisticated, or can trivially afford financially sophisticated advisors, and (b) are unlikely to be staking so much on a single deal that their long term outcomes will be at risk.
How do you correlate existent material wealth with any of your claims?
What's to stop an inheritor from making a poor investment with all their capital? Or a lottery winner? Or ANYBODY with that kind of money, really?
Why is it presumed that at "arbitrary net worth 1 million," a person is "financially sophisticated?"
If the sec wants to I guess "protect people from themselves," why don't they have an actual certification system that is based on a demonstration of knowledge?
Finally, why aren't people with a net worth of under 1 million protected from other poor financial decisions, since in your mind they are not "financially sophisticated" and thus are more likely to engage in payday loans or other predatory financial institutions?
> 'Why is it presumed that at "arbitrary net worth 1 million," a person is "financially sophisticated?'
It's not so much proving they are financially sophisticated as it is saying they have enough that "they are on their own". For instance, I can't recall many people caring about the wealthy who lost so much in the Madoff scandal. Most opinions seemed to be "they should have known better".
> 'If the sec wants to I guess "protect people from themselves," why don't they have an actual certification system that is based on a demonstration of knowledge?'
You can actually be exempt from the income/wealth requirements if you are an investment advisor / registered broker. I believe you can be an executive at the issuer and be exempt to.
> 'Finally, why aren't people with a net worth of under 1 million protected from other poor financial decisions, since in your mind they are not "financially sophisticated" and thus are more likely to engage in payday loans or other predatory financial institutions?'
SEC doesn't regulate those. I agree predatory lending should be reigned in though.
Actually, I agree that the RegD numbers are arbitrary. They should be much higher: they haven't tracked inflation. A person with 200k in annual income in 2017 is by no means necessarily in a position where they can safely invest in securities that have exempted themselves from disclosure requirements to their investors.
On the other hand, someone with $150K income and $800K net worth can easily afford a $5K investment, and is probably sophisticated enough to not be completely stupid about it. It makes more sense to use percentages rather than a fixed cutoff (and in fact that's what the JOBS Act does).
And, in fact, even if you make $50k a year, you can invest up to low-thousands in RegCF regulated issuances, or even more in a Reg A+ mini-IPO issuance.
By and large, the entities pursuing 8-figure ICOs are those that (a) don't want to spend $10,000-$20,000 to engage with the SEC and adhere to their disclosure rules, and (b) aren't credible enough to raise from accredited investors.
What's crazy to me is the notion that a business venture that can't scrap together $20,000 should somehow obviously be entrusted with $15,000,000 of retail investor money.
