At Token Summit 2019 in New York City, the panel discussion “The state (or stalemate) of regulation” featured Mike Didiuk (Perkins Coie), Nancy Wojtas (Cooley), Andreas Glarner (MME), and Robert Rosenblum (Wilson Sonsini), and was moderated by William Mougayar.
The panel explored whether the US was losing its position as the standard bearer on the cutting edge of finance. It also touched on other, more sensible jurisdictions. Towards the end, a familiar crypto voice appeared from the audience during the talk for the Q&A.
“Hi, I’m Vinny Lingham from Civic. Hi.” He proceeded to ask his question.
“I had a question around the accredited investor status in the US,” said Lingham, who is one of the sharks on Shark Tank South Africa. “I’m obviously South African born and I don’t have the background to why it’s in place. It seems like a very arcane, old way of looking at many people, and the credit basic checks, from what I’ve seen so far, in terms of implications, it’s really implying that you need to have money in order to be educated or at least financially literate.”
Certain members of the audience then broke into applause. Lingham continued.
“Having come from Africa, when I came to the US, I was not an accredited investor, especially with the Rand’s weak position against the dollar,” said Lingham. “So, I wouldn’t have qualified as one, either. So, a lot of times we try to position tokens in the US as securities, and by definition investment contracts, et. cetera. Are we trying to say that only people who have money are smart enough to understand what that means? I I think it’s very short-sighted. And then we’re positioning Americans and American population against the rest of the world as having wealth as an indicator of intelligence.
He wasn’t done.
“And then, what’s happening in the rest of the world, people who say past accredited investor check thing, they are producing more sensible regulations that are opening it up,” he said. “And, so as entrepreneurs we’re trying to attract capital from the smart money, may not have millions or have high income all sitting up in Switzerland or Singapore or wherever else….”
Mougayar then asked Lingham what the question was.
“The question is like, What is the purpose of the credit investor checks and why do they exist, and how did we get to this point, and do you guys support it?”
Nancy Wojtas answered the question.
“With the Reg A plus, the general public can invest, there are limitations on amounts,” she said of the law passed by Congress. “But again, our regulations were somewhat paternalistic. We want to try to protect people from themselves, which is how the accredited investors standard kind of developed. There are regs under Reg D where nonaccredited investors can obviously invest.”
To her knowledge, many token offerings, who are trying to rely on the Reg D, have gone ahead and taken on those investors.
“The thinking is that if you’re an accredited investor, you have a level of wealth that you can sustain the risk and you can sort of fend for yourself,” said Mike Didiuk of Perkins Coie. “You’re sophisticated enough to evaluate a security offering that isn’t going through the full registration. It’s an exempt offering.”