Alex Tabarrok summarizes a suggestion from Matt Levine on how to improve the rules for accredited investors:
Matt Levine has an excellent piece on accredited investor rules and his alternative:
- Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
- To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing, anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
- Then you take the form to an SEC employee, who slaps you hard across the face and says “Really???” And if you reply “Yes, really,” then she gives you the certificate.
- Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.
