Lawyer: Raising money will get harder

September 13, 2010
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Entrepreneurs considering raising money by selling stock to individual investors should get moving before regulators step in and make the process more difficult.

That’s the take of Jeremy Hill, who chairs the emerging business group at law firm Bingham McHale. Within two years, quite possibly sooner, the government’s definition of an “accredited investor” is likely to be further tightened, shrinking the pool of people who can invest without the need for expensive documents designed for unsophisticated investors.

Accredited investors are considered to have enough sophistication to not need thickly detailed disclosures.

The Wall Street Reform and Consumer Protection Act, otherwise known as the bank reform bill, eliminated the value of an investor’s house from the equation, meaning an investor has to have a net worth of $1 million without counting their primary residence.

Left untouched in the July 21 legislation was the net-income threshold—$200,000 a year for individuals and $300,000 for an individual and their spouse—in each of the past two years.

As it puts the bill into effect, the Securities and Exchange Commission will probably increase the net-income requirement, Hill says.

Hill believes the stripping of primary residences from the net-worth test was a shot across the bow that too many people were being allowed to make investments with too little sophistication.

“This is clearly the first of things to come,” he says.

Hill thinks the reforms are overdue. While the real estate collapse for now has tempered the practical results of the net-worth test, many people had seen values of their properties rise so high that they suddenly could pass for accredited investors. Too many were anything but sophisticated, he says.

Hill thinks the income threshold should be increased by about 50 percent.

New regulations could arrive in a few months, he believes.

What are your feelings about raising the standards? Were they too low?

Any other thoughts about bank reform?
 

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  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

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