Arnold comes down on the side of paternalistic regulations on investment:

To me, an entrepreneur who looks for investors is like somebody who can’t swim who finds himself in the middle of a lake. It’s dangerous to go near the drowning man unless you know what you are doing. If you are not a trained lifeguard, chances are he will drown you as well as himself.

So as much as I’d like to abolish regulations, just about the last one that I’d abolish would be the one keeping low-net-worth individuals away from start-ups. I think we need fewer fund-raising start-ups and more start-ups where the entrepreneur figures out something to sell that will bring money into the company early on.

But even if you buy the claim that it’s foolish for low-net-worth individuals to make these investments (plausible), and want to protect them from themselves (morally questionable), there’s still the big problem that there are a million different ways for fools to squander their money. The regulations Arnold favors only protect a very strange kind of fool – one who acts prudently once you take away one foolish option.

In reality, I doubt these regulations have any net benefit even from a paternalistic standpoint, because people will just invest in some other get-rich-quick scheme – whether it be llamas, real estate, foreign exchange, or whatever the next cheesy infomercial suggests. There’s no way around it: Whatever the law says, a fool and his money are soon parted.