This is the Cato Daily Podcast for Friday, October 23rd, 2020.

I'm Caleb Brown.

The Securities and Exchange Commission recently changed its definition of accredited

investor.

But why is there a legal distinction for people who have special access to

investments in the first place? Why do some people have access to those investments

that you and I do not? Jennifer Shelp directs financial regulation studies at the Cato Institute.

We talked about how rules governing who can invest in what changes the playing field.

Help me understand how an individual who wants to own a chunk of equity in either a local business

versus say a chunk of equity in Alcoa or Microsoft or Google?

Well there's different types of markets and when we tend to think about owning equity in the

U.S. we tend to think about buying equity off of the NYSC or NASDAQ and those are publicly listed companies that are subject to all of the

restraints that the SEC puts out on those companies. But in fact publicly listed companies don't make up

the largest chunk of capital raised in this country. In fact in 2018 the public markets raised 1.4 trillion dollars

but the private markets raised 2.9 trillion in 2018.

And we don't tend to think about investing

in the private markets when we think about investing.

And one of the reasons that we don't tend to think about it

is most regular folks can't invest in the private markets.

Depending on the offering, private market investments are limited to what we call accredited investors and that is an individual who makes at least $200,000 a year or $300,000 a year with their spouse or has a net worth excluding their

residence of over a million dollars. And typically traditionally, unless you met that standard,

you were not allowed to invest in most private offerings.

...