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31 Rev. Banking & Fin. L. 987 (2011-2012)
Why the Accredited Investor Standard Fails the Average Investor

handle is hein.journals/annrbfl31 and id is 999 raw text is: ACCREDITED INVESTOR STANDARD WHY THE ACCREDITED INVESTOR STANDARD FAILS THE AVERAGE INVESTOR SO-YEON LEE* I. Introduction The rich get richer is a timeless truth.' While this may be self-evident, some of the reasons why the rich seem to get richer are less apparent. Surprisingly, U.S. securities regulations award special investment privileges to the already affluent, resulting in a legal system that makes it even easier for them to amass wealth.2 Private placements operate as one such privilege. Because most investment decisions are executed in a public marketplace, rules that govern securities market transactions can directly impact an investor's earning capacity. By placing limitations on who can invest in private placements, regulators seek to protect investors and 4 the amount of risk they can undertake. Risk and return, however, are incontrovertibly linked: if one investor is able to take advantage of investment opportunities that are unavailable to others, he or she may potentially earn larger returns.' Consequently, the government's * Boston University School of Law (J.D. 2012); University of Nevada, Las Vegas, Finance (B.S.B.A. 2009). Ms. Lee thanks Professor Tung for his insightful review of an earlier draft, as well as the staff and editors of the Review of Banking and Financial Law for their help in preparing this note for publication, with a special thanks to Executive Editor for Notes & Comments, Mirela Hristova, for her meticulous and thoughtful edits. 1 See Robert C. Lieberman, Why the Rich Are Getting Richer, FOREIGN AFFAIRS, Jan. 2011, http://www.foreignaffairs.com/articles/67046/robert-c- lieberman/why-the-rich-are-getting-richer?page=2. 2 See id. 3 Robert J. Bloomfield, The Incomplete Revelation Hypothesis and Financial Reporting, 16 AcCT. HORIZONS 233, 239 (2002). 4 See Jerry W. Markham, Protecting the Institutional Investor-Jungle Predator or Shorn Lamb?, 12 YALE J. ON REG. 345, 354 (1995). Access to better investment opportunities is just one why of explaining why a particular investor is more profitable than another. Access to better information is an important factor as well. Nonetheless, this note limits its focus to investment opportunities. Balancing Risk and Return to Meet Your Goals, OFFICE OF THE ATTORNEY GEN. OF THE STATE OF N.Y., http://www.oag.state.ny.us/investor- protection/balancing-risk-and-return-to-meet-your-goals (last visited Apr. 5, 2011-2012 987