But if you really want to play conspiracy theorist and start your doomsday clock, get a load of recent action by the Securities and Exchange Commission. This from Ronald D. Orol at MarketWatch:
A panel that advises the Securities and Exchange Commission on Friday recommended an exclusive exchange be created for micro- and small-capitalization public companies that would only be available for only high-net-worth investors. …
Companies listing on an exchange set up for high-net-worth investors may not be required to provide costly prospectuses and other disclosures that are necessary when retail investors are involved. Backers contend that this would drive down costs associated with public offerings and could encourage private companies to take the plunge into becoming almost-public companies. However, retail investor advocates worry that small investors would be blocked from making desired investments.
In summation: The SEC is looking to carve out a special niche market for startups and small companies that will lack transparency and that only the very rich can dabble in.
Sounds great, doesn’t it?
And now the playing field will tilt further in favor of the rich if this recommendation gains traction. Charles Rotblut, vice president of the American Association of Individual Investors, spoke with MarketWatch on the issue, saying, “An accountant that does not have the wealth to be an accredited investor, but understands financial statements, would not be allowed to invest.”
Furthermore, Rotblut added that these privileged rich have no special skill or talent — and probably would be just as likely to get taken to the cleaners.
“Having wealth does not mean you have the knowledge to always make intelligent investment decisions,” Rotblut told MarketWatch.
Hmm … taking this into account, maybe having a special exchange for the idle rich isn’t a bad idea. Because why would they mess around with pinching pennies from us when they can focus on millionaires — and with less disclosure to boot?
On second thought, go right ahead, SEC.
Just make sure that whatever shenanigans go on in this corrupt marketplace don’t bleed over into my 401k or IRA.
- Read the panel’s recommendations on the official SEC website. (SEC.gov)
- Oh yeah, and microcaps are a playground for fraud to begin with … so non-disclosure deals are probably a great idea for this proposed exchange. (AAII.com)
- How to spot investment fraud. (USA.gov)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.