Those who forget history…

Today the JOBS Act went live, allowing for public solicitation for unregistered securities.

Here’s a summary from the NY Times. In case you’re too lazy to click:

  • Companies can now raise up to $1MM for unregistered securities
  • They can also advertise the offerings publicly (on TV, radio, blogs, etc.)
  • For now, investment is limited to so-called accredited investors (people with net worth north of $1MM excluding their homes, or incomes north of $200K / year)

You might expect that I would be thrilled about the change to the law, but you would be wrong.

You see, this new status quo isn’t really new… it’s basically what prevailed prior to the 1930s. Before then, anyone could go around pitching investments. Guess what happened?

Tons of fraudsters stole lots and lots of money by advertising “investments” that were really ponzi schemes and the like.

Eventually, regulations were put in place to stop the shenanigans. Now, those regulations are going away. So, my guess is that the fraud is coming back. Over the long term, that’s terrible for my business, because my ability to grow depends on my ability to continue to convince investors to put their money with me. And, investors who have been burned before are very unlikely to trust anyone ever again.

My advice to all you accredited investors out there is to hold onto your wallets.