Why do these organizations have financial suitability requirements? Are these just “concerned citizen” guidelines so that these organizations don’t get slammed in the media as preying on naive low-income people who think they can get big bucks, or is there something more serious going on?
Manager: “Ok guys, I need ideas on how to get more investors.”
Joe: “How about we open investing up to Virginians?”
Manager: “Eww, Virginians? Those tobacco-growing cousin-marrying hillbillies? What will that do to our image? ‘Borrow from hicks.’ they’ll call us.”
Joe: “Well, you have a point there, but I don’t think that Virginians are all bad.”
Bill: “How about the following policy for Virginians? They must either (1) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (2) have a net worth (determined with the same exclusions) of at least $250,000. In addition, they may not purchase Notes in an amount in excess of 10% of their net worth, determined exclusive of home, home furnishings and automobile.”
Manager: “I like it!”
Joe: “I’m still not sure why this is so important, because people from Mississippi are allowed to lend and we don’t put any of those requirements on them.”
Manager: “Shut up.”
Why would Prosper llending be restricted to high-income Virginians but they will take anyone from Mississippi? Why would they do that?
And, what actually happens if you sign up notwithstanding “ineligibility” and get caught? Nothing? FBI raid?