SECURITY REGULATIONS How They Have Helped Ruin the U.S. Economy
by James Jaeger
I tried to do a Reg D offering around 1990 that would have given employment to about 100 people.
At great time and expense the business plan for the company was researched and drafted. Pro forma financials were prepared and a 501 offering circular was put together with one of the major firms in Philadelphia. We also had a "Big 5" accountancy lined up to provide an initial audit for the circular.
But after years of effort, all this failed. Why? It failed because the Securities & Exchange Commission in DC and the "Pennsylvania Department of Banking and Securities" had enacted Marxist and fascist "laws" and "regulations" to protect investors -- all at the expense of me, the entrepreneur/small businessman. It was thus impossible for our new company to make enough "offers" to enough "accredited investors" and people with whom I had an established "prior relationship" to raise the funds necessary for the initial audit. And without audited financials from a "Big 5" it would have been very difficult or impossible to have closed the minimum number of subscriptions for the offering. So the technical reason my "American Dream" crumbled is because federal and state securities agencies -- in the name of "protecting" the investor, protecting the "folks" -- had enacted so many onerous rules it was impossible to raise capital.
Among the most suppressive SEC rules is the one forbidding an entrepreneur from offering more than 35 people an opportunity to purchase stock in his new company. And Pennsylvania is an even WORSE place to do business, as the "PA Department of Banking and Securities" only allows the entrepreneur to make offers to 10 people. Obviously the BANKS would prefer businessmen to BORROW capital rather than generate it in EQUITY-raises.
It was thus a water-on-fire experience to see that -- years and decades later -- after the "NEW DEAL" ruined the economy and most of the middle class, the freaks in the government are finally getting around to changing the securities laws. See http://articles.washingtonpost.com/2013-03-28/business/38084496_1_jobs-act-president-obama-measure.
Per the Washington Post:
Yes "hotly debated" between ignorant socialists in the Democratic party who have never even TRIED to finance a start-up and entrepreneurs who are simply trying to bring new and innovative products and services to market. As we can now all see, the cultural MARXIST-infested Left and the corporate FASCIST-infested Right, have formed two wings of nothing more than a common plutocracy. The rich and established bankers have made it difficult or impossible for the entrepreneur and small businessman to get started or to compete in the free market."The measure is a grab bag of ideas cobbled together for greater impact. It allows private firms to raise money by advertising to the general public for the first time in decades, raise up to $1 million in capital from investors via the Internet, and temporarily skirt some of the federal disclosure and accounting rules as they go public. The legislation was built on the premise that regulation constrains the growth of small businesses and their potential for explosive job growth - an assertion that has been hotly debated by economists for decades."
Here we have yet another unintended consequence of government intervention in New Deal legislation that established the Securities Exchange Commission. See http://www.sec.gov
After the Stock Market Crash of 1929, the government, banks and public refused to acknowledge that the Crash was caused by the "easy money" coming out of the Federal Reserve System which was formed 16 years earlier. The blame was placed almost entirely on the lending margins so the Fed bankers would not come under scrutiny. But from 1913 to 1971 the Fed Bankers, in cahoots with the Congress, was slowly removing gold and silver backing from the US dollar. They went from "Gold Certificates" to Silver Certificates" to "Lawful Money Certificates" to "Federal Reserve Notes." Now the US dollar has no value whatsoever other than what WE THE PEOPLE "believe" it has. This long-term scheme made it easier and easier for the established banks in New York City to monetize debt and lend this out as new money. Thus the idea that a securities and exchange commission be formed to "protect the investors" was born in fertile ground. It would also help the established banks and corporations raise money while suppressing the small businessman and entrepreneurs. "Competition is a sin," as the late John Rockefeller use to say.
Why should "laws" be made to protect established businesses and major banks at the expense of the entrepreneur? Let the buyer beware. Let investors, whether large or small, beware. That's the way the free market works. No SEC needed. Investors -- many of them 1-Percenters -- don't get to have their government cronies in there to "protect" their assets at the expense of the 30 million WE THE PEOPLE who make up the small business community and the untold hundreds of millions of consumers that benefit from small business innovation.
THE RED TAPE THE NEW DEAL CAUSED IN THE NAME OF "PROTECTING" THE INVESTOR HAS DONE LITTLE MORE THAN KILL OFF MILLIONS OF START UPS AND SMALL BUSINESSES.
And everyone wonders why the unemployment rate is so high.
NOW THE COUNTRY IS DYING THANKS TO THE COWARDICE AND GREED OF INVESTORS, BANKERS AND THEIR LAWYERS WHO HAVE BEEN PROFITEERING OFF SECURITIES REGULATIONS.
The Securities and Exchange Commission is thus a socialist organization, formed and founded by socialists and their K-Street accomplices: it socializes protection at the expense of individual initiative. And this goes for STATE security regulations as well: many of which are actually WORSE than the SEC in DC.
Investors should not be classified into rich investors and poor investors as is done in section 501 whereby rich investors defined as "a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person; or a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;"
This exemption is nothing more than a Band-Aid for two other regulations that have detrimental effects: The "no public offering" regulation and the "maximum number of offers that can be made."
Every "natural person," and other entity, no matter what their income or assets should be responsible for what they buy. This should include buying securities, also known as "subscribing to stock offerings" or "investing."
If investors rely on government agencies, like the SEC, to force businessmen to "comply" and "disclose," they are relying, in essence, on central planners. Investors should be relying on themselves, their own study, knowledge and due diligence. Investors should put as much time and effort into buying securities as they do buying a new car. Do investors want the government to help them buy cars? No. So why should the government help them buy stock?
Again, the adage: let the buyer beware is what makes the free market strong because it makes the investor and businessman strong. To the degree an investor farms out his "due diligence" to another mind or some government agency, that investor is shirking his responsible and participating in the imprudent allocation of valuable capital.
THERE IS THUS NOTHING WRONG WITH CAPITALISM IF WE KEEP GOVERNMENT FROM MESSING IT UP
The savvy, responsible investor does not rely on the Feds or the States to "protect" him like a little baby. He protects himself or he gets the fu*k out of business. Laying the risk of investing fiat currency off on government flunkies has abetted the endless malinvestment and boom-bust business cycles Ron Paul talks about.
The business practice of relying on government to "protect" purchases in the private markets is nothing less than socialism, if not communism. Millions of people are now suffering because of unwise decisions made in the New Deal.
Heads are going to roll when the sleeping giant awakens and fully realizes how SEC regulations, along with fiat currency, have ruined the U.S. economy. A liberalization of the regulations is a step in the right and hopefully the states will follow suit. Hopefully the government will back out of the citizen's right to spend money as they see fit, whether toast poppers or common stock.
The New Deal regulations that were suppose to protect the public from fraudulent offerings has done little more than stunt the growth of the nation while enriching the Fed-member banks, accredited investors, corporate lawyers, broker-dealers, and audit firms. All of these profiteer off the backs of entrepreneurs and small businesses -- the source of 80% of America's employment.
ORIGINATED: 16 July 2013
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