This is the Cato Daily Podcast for Tuesday, June 14th, 2016. I'm Caleb Brown.

When you help a friend out by investing in his business, you probably don't think much about the

Securities and Exchange Commission getting involved, but when your

buddy offers you the promise of a future return, he's offering a security.

And the SEC's rules might hinder those kinds of offerings in the future.

Theonite is Associate Director for Financial Regulation Studies at the Cato Institute,

she comments.

When you think of a public offering of an equity you think of Facebook or Google or some sort of

large this is a big deal, it involves investment banks, it involves all sorts of things,

but the way the SEC looks at public offerings, it can include people who are just trying to start a restaurant.

I think that the idea generally is that if you're doing a public offering, you know you're doing a public offering,

that it's something you've

opted into where you've said like Facebook oh we're going to do our IPO we've

hired lawyers we've hired an investment bank and that it's the kind of thing you couldn't just stumble into because it's such a big thing,

how could you stumble into that?

But actually, the way the securities laws are written is that if you are offering investment in a company,

you either have to go through an entire IPO process or you have to qualify for a specific exemption under the securities laws.

So somebody could very easily run afoul of this if you say wanted to start a restaurant, for example,

and you call a few of your friends and say, hey I'm going to start this restaurant for example and you call a few of your friends and say hey I'm

going to start this restaurant you want to give me some money and then I'll give you

some of the profits once you know the thing is up and running and to you that just feels like well sure these

are my college buddies we're just going to start this restaurant together and

...