Washington's Proposed Rules to Protect Investors Could Widen the Wealth Gap

1/14/2022 11:03:00 PM

'This would be a significant step backward in financial equality in capital markets,' one expert said

'This would be a significant step backward in financial equality in capital markets,' one expert said

The regulator wants to limit the ability of people with less than $200,000 in annual income or $1 million in net worth to invest in non-public companies.

Traders work on the floor of the New York Stock Exchange (NYSE) on December 13, 2021 in New York City.The leader of the Scottish Tories called for the prime minister’s resignation, only to be dismissed as “quite a lightweight figure” by the Leader of the House, Jacob Rees-Mogg.some decoupling between the US and China was inevitable , particularly over technology.WhatsApp O f the five Central Asian “stans” that emerged as independent republics from the collapse of the Soviet Union in 1991, Kazakhstan had seemed the most prosperous, best-run and most stable.

Spencer Platt—Getty Images—2021 Getty Images By January 14, 2022 12:04 PM EST T he Securities and Exchange Commission is pushing for significant changes in how private funded companies operate and who can invest in them, the agency said this week.The proposed changes probably won’t benefit rank and file American investors but will likely help people who are already rich get even wealthier..While the details remain unclear, the SEC says it wants to increase the financial transparency of large companies which raise money away from the public markets.There was some New Zealand interest in the BRI under former prime minister John Key’s centre-right National government.In addition, the regulator wants to limit the ability of people with less than $200,000 in annual income or $1 million in net worth to invest in non-public companies.In short, the current system, which already excludes the vast majority of Americans, could get more restrictive.In January, protests started in the south-west of the country against the rising price of car fuel.

In turn, the changes could widen income inequality, something which the Biden administration says it wants to reduce.Last year, Wellington indicated a willingness to work with China on “mutually beneficial” BRI projects with an environmental emphasis.“This would be a significant step backward in financial equality in capital markets,” says Phill Haslet, co-founder of EquityZen, a financial company that specializes in investments in private companies.“We should be making capital markets more inclusive, not less.” The first part of the equation is improved transparency of larger private companies.That probably won’t be welcomed by the companies themselves, but investors will almost certainly receive such a change warmly because more disclosure allows Wall Street to make better informed decisions.Nazarbayev, now 81, hasn’t been heard from throughout the protests.

“Generally speaking, these companies don’t want to give out much information,” says Nicholas Economides, a professor of economics at NYU Stern.“Rightly or wrongly, they are concerned that their business plans are going to become known, and they want to keep those secrets.” In other words, private companies like operating without exposing too much information to the outside world.The SEC’s pending push for more disclosure of key information from private companies comes as the number of U.S.Security forces opened fire, killing more than 60 people, by some estimates.

public companies has dwindled to levels far below the levels seen a quarter-century ago.At the end of 2019, there were 4,266 public companies, down from 8,090 in 1996, according to World Bank data.The current level is similar to that in the 1970s when the economy was far smaller than it is now.The drop in the number of listings came mainly following the passing of the Sarbanes-Oxley Act in 2002, which introduced a slew of new, and largely onerous regulations that public companies and their leaders needed to follow.As the full burden of the rules became clearer, fewer enterprises went public.To fix the shortages, the government removed the cap.

That also had the advantage of keeping private company information out of the limelight and away from newspapers, investors, and competitors.Read More: How the Enron Scandal Changed American Business Forever That lack of financial disclosure has clearly irritated some market professionals.“I think the lack of transparency in private markets is problematic and willful,” says Dr.Richard Smith, author of the Risk Rituals financial newsletter and a financial markets expert Meanwhile, the private capital markets have boomed, allowing more non-public companies to grow large, many with valuations of $1 billion or more.It’s those so-called unicorn companies that the administration wants to target for more transparency.But by then, the fuel had already ignited.

And that’s likely an intelligent government move.“In terms of investor protection, promoting transparency is always a good thing,” says John Taft, vice chairman of financial company Baird.That’s because more information allows investors to make better decisions in funneling capital to the best opportunities, thus making the economy grow faster.While the entire country tends to benefit from more economic growth, the investors in such companies reap the bulk of the financial rewards.And there’s the rub because most Americans are excluded from investing in private companies.His new father-in-law – who was still Malaysia’s prime minister at the time – was equally upset at suggestions that there was anything improper in the financing of at least three extravagant wedding receptions (two in Malaysia, one in Almaty).

“Generally, investing in private equity and venture capital is still restricted to higher net worth investors,” Taft says.These so-called accredited investors need to have an annual income of at least $200,000 ($300,000 for couples) or a net worth of $1 million or more.Those accredited investor requirements rule out most of the U.S.population from investing in private companies funded by private equity or Silicon Valley venture capitalists.For the groom’s family, too, unpleasant stories have been hard to avoid.

That’s because the median household is far too low at approximately $67,500 in 2020, according to government data.This barrier to investing means that most Americans cannot participate in the superfast growth generated by some startups in Silicon Valley or elsewhere in the private markets.A case in point is the spectacular growth of Meta (formerly known as Facebook) during its ultra-high growth period.The first investment of $500,000 occurred in 2004 when the company was valued at around $5 million.In 2012 the company went public with a value above $100 billion.And “Astana”, which just means capital, was hardly dripping with historic import.

That’s at least a twenty-thousand-fold increase in value in less than a decade.But only people who were already well-to-do could participate in such gains.Compare that to returns on the S&P 500 over the same period – that wouldn’t have even doubled your money.That two-tier investing system – one of potential humongous gains for the elite and one of more subdued increases for everyone else – has attracted criticism.“The intent of the American capital markets should be to make them more inclusive,” Haslet says.It took years of wheedling from his loyal subjects for him to be persuaded that the new name was no more than his due.

“Yet, the majority of value appreciation in technology companies is not finding its way into the pockets of your average American.” More Must-Read Stories From TIME These.

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