SEC Annual Forum on Small Business Capital Formation: Ground Hog Day for Small Biz?

Posted on November 1, 2014 by Samuel Guzik

Ground Hog Small Business Forum SEC

Many of us are wondering when, if and how the SEC will finally roll out final regulations to implement major provisions of the JOBS Act of 2012, including Title III (investment crowdfunding) and Title IV (Regulation A+). So too were a group of Congressmen, gathered in the Halls of Congress in Washington, D.C. on July 24, 2014. The purpose of the gathering: to inquire of Keith Higgins, Chief of the Division of Corporation Finance at the SEC, as to the status of JOBS Act rulemaking.

Yes, questions were asked and answered. But by the conclusion of the hearing those assembled, and those watching via live video, knew little more than before the hearing started.

Two lines of questioning made an impression on me:

  • When would final rules be implemented by the SEC, and
  • Whatever becomes of the recommendations made by participants at the SEC’s Annual Forum on Government-Business Forum on Small Business Capital Formation.

Groundhog Day by Aaron SilversAs to the “When” question, the answer was direct and clear: “we’re working on it.”

As to what happens to the recommendations made by Forum participants at the annual gathering of small business representatives, we learn “they are passed onto the Commission.”

History teaches us two things regarding the Forum: There is very little to show for small business capital formation as a result of the Forum recommendations, and there is no degree of accountability or follow-up built into the Forum program.

Alas, having stumbled across the SEC’s website seeking recommendations from the public for the upcoming 2014 Forum (SmallBusiness@sec.gov), I suppose I could simply have taken a cynical approach – suggesting Groundhog Day Logothat the Forum location be moved to Punxsutawney, Pennsylvania, home of the annually celebrated Groundhog Day.

Instead, I chose to put pen to paper and provide suggestions to the SEC on how they might actually invigorate the Forum, and shape it into a more meaningful use of time, talent and resources of those concerned about improving the ability of small business to raise capital. I am unsure whether this suggestion will simply follow Punxsutawney Phil down the dark burrow he calls home, or whether this suggestion will ever cast a shadow in the light of day.

Thus, I share with you my missive to the SEC, as sent to the SEC on July 28, 2014:

______________________________

Ladies and Gentlemen,

I write to you in regards to the upcoming SEC 2014 Government-Business Forum on Small Business Capital Formation. After more than 30 years of annual Forums, mandated by federal legislation going back to 1980, perhaps this is an opportune time to consider a different approach.

A stated purpose of the Forums was set forth in the 2013 Forum Report:

“A major purpose of the Forum is to provide a platform to highlight perceived unnecessary impediments to small business capital formation and address whether they can be eliminated or reduced. Each Forum seeks to develop recommendations for government and private action to improve the environment for small business capital formation, consistent with other public policy goals, including investor protection.” [Emphasis Added]

Keith Higgins 2What appears to be missing from the Forum regimen is the absence of any type of follow-up, either between Forums, or at the next succeeding Forum. According to the Director of the Division of Corporation Finance, Keith Higgins, in response to a question posed to him in recent testimony before the House Financial Services Committee on July 24, 2014, the recommendations of the Forum participants are simply “presented to the Commission.” History shows that something more needs to be done, rather than simply passing these recommendations on to the Commission, only to resurface at the next year’s Forum, or die a quiet death.

Equally absent is the sense of any accountability, or urgency, on the part of the Staff of the Commission, with regard to the recommendations of the Forum participants. Again, in recent testimony by Mr. Higgins, he remarked that none of the Forum recommendations were given a “high” priority by the Forum participants – instead all of the recommendations were rated as either “medium” or “low” priority. Indeed, if achieving a “high” priority is a quid pro quo to follow-up action by the Staff, this explains why most of the scores of recommendations made by Forum participants over the past 30 years never saw the light of day at the SEC following the conclusion of the Forum. Indeed, based upon the quantitative rating scale utilized by the Staff to assess “priority,” it is safe to say that will be a rare day indeed when any recommendation, regardless of importance, achieves the benchmark of a “high” priority. Indeed, the rating scale appears to do little more than to provide “cover” to SEC officials, when asked to account to those outside SEC Investor Advocatesthe Commission as to why Forum recommendations have not been acted upon, let alone further considered at the conclusion of each Forum

In sum, Mr. Higgins’ recent remarks suggest that the Staff of the Commission, at best, simply passes the buck to the Commission following the conclusion of each year’s Small Business Capital Formation Forums. Given both the importance of capital formation for small business, the role of the SEC in facilitating capital formation, and the time, energy and resources expended by the Forum participants, perhaps it is time for the Commission to consider some element of “follow-up”, and accountability, by the Commission, both as part of succeeding Forums, and during the 364 days in between each Forum.

There are myriad ways the Commission could implement some element of “follow-up” or accountability. Given that this involves, in the first instance, the internal processes of the Commission, it seems that proposals for how this could be incorporated into the Small Business Forum regiment ought to be initiated by the Staff itself. By way of example,perhaps it ought to fall to the Office of Small Business Policy to take the leading oar on recommendations following the conclusion of each year’s Forum. Perhaps a component of each year’s Forum ought to include a “State of Small Business Capital Formation,” whereby the Commission and/or the Staff advises the Forum on what has been achieved for Small Business as a result of the prior year’s Forum and respond to questions by participants as to prior year(s) recommendations.

By way of example only, the 2012 Forum had particular significance, coming on the heels of the passage of the “JOBS Act of 2012.” The November 2012 Forum had as its Number One recommendation:

Required disclosure for crowdfunding issuers should be simple and allow for standardization, and take into account the size and stage of development of the issuer (including, specifically, whether the issuer is a start-up). [222 points; avg. ranking 3.89]

This recommendation did not get very far, judging by outward appearances. The Commission’s Proposed Rules implementing Title III of the JOBS Act dismissed this recommendation in its entirety, instead stating that third party service providers could aid small businesses in the disclosure process. And less than two months later, when the Commission proposed its Title IV rules (Regulation A+), it proposed to entirely eliminate the optional standardized Question and Answer format adopted from the apparently successful model in state registered small business “SCOR” offerings as a result of the joint collaboration between The North American Securities Administrators Association (NASAA) and the American Bar Association.

In sum, if history is to be any guide, for decades the Commission has squandered valuable time, resources and, most importantly, ideas, of the scores of Forum participants who convene every year at the Commission’s Headquarters to take part in the Government-Business Forum on Small Business Capital Formation. The time has come for the Commission to develop some degree of self-accountability and transparency, in the context of the annual Small Business Capital Formation Forum. Then, and only then, will a representative of the Commission be able to address members of Congress in a meaningful way, when asked: What happens to the Small Business Capital Formation Forum recommendations?

Until then, the annual Small Business Forum will be more akin to Ground Hog Day – albeit with small business never seeing its shadow.

I would be pleased to discuss this further with the Staff when, as and if it is so inclined.

Respectfully submitted,

Sam Guzik

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Open Letter to the SEC: Please Don’t Hang Up on Small Business (And Please Don’t Put Small Business on Hold)

Posted on August 8, 2014 by Samuel Guzik

Phone Booth Hangup

Some of you who read my July 2014 article entitled “Intrastate Crowdfunding at Risk -Has Intrastate Crowdfunding in Washington State Been Washed Out by NASAA and the SEC?” may have concluded that I was making a mountain out of a mole hill – or perhaps that I was being too harsh on the North American Securities Administrators Association (NASAA).

Bumpy Road DangerIn that article I raised concerns about recent informal SEC rulemaking which impinged upon the abilities of states to fashion intrastate crowdfunding legislation – particularly states that relied on the federal securities exemption allowing companies to offer and sell securities in their own states without triggering federal registration. My article focused on what I believed was both a narrow and outdated reading by the SEC of what constituted an “intrastate offer” in the day and age of the Internet. According to the SEC, an issuer could not advertise its intrastate offering on the Internet, even with cautionary language indicating that the offer and sale was only made to state residents, as this would be deemed to be an offer outside the targeted state.

Well, I did a little digging since I wrote the article. In doing so I discovered a sad irony. Seems that NASAA in 1996 recognized the need to bring Internet offers in line with state securities regulation. Specifically, NASAA issued a Policy Statement to the effect that simply because an Internet offer was available to its residents on the Internet, a medium which shows no regard for state borders, it would not ipso facto be viewed as an offer in a particular state so long as no sales were made in that state. Seems that andrea-seidt-nasaathe SEC Division of Corporation Finance never got that memo when it wrote its Interpretive Release in 1998 regarding cross-border offerings. But the Internet was still in its infancy, with only 15 million households having access to the Internet in 1998.

A great deal has changed since 1998. So score one for NASAA, who got it right on Internet solicitation as early as 1996, at least when sales were made in somebody else’s state (as in “NIMBY”).

Intrastate Crowdfunding is only the Tip of the Iceberg

Iceberg that sank TitanicAnd as for molehills, intrastate crowdfunding offerings are only the tip of the iceberg. While the crowdfunding world (im)patiently waits for final regulations in both Title III of the JOBS ACT (crowdfunding), and Title IV (Regulation A+ – or what I refer to as “CrowdfundingPlus,”) there has been an onslaught of lobbying activity in Washington by NASAA against Regulation A+, an exemption from registration allowing offerings up to $50 million, through a short-form SEC registration process. What has incurred the ire of NASAA is the SEC’s proposal that all investors are able to participate in a Regulation A+ offering without the need for a company raising funds to also seek approval in every state in which the offering is made.

$1000 in $100 BillsAnd what is not widely known is the intensity of the lobbying efforts brought to bear on the SEC since the Title IV rulemaking comment period ended on March 24, 2014. Indeed, I suspect many, including those at the Commission, are unaware of what NASAA is saying and doing about the JOBS Act outside the earshot of the SEC.

Out of concern that the SEC may accede to the intense lobbying pressure of NASAA as regards Regulation A+ and once again leave this exemption as a useless relic, I submitted a second comment letter to the SEC on July 5 in order to create a more balanced record on behalf of small business.

JOBS Act 2012 TextYou may be surprised at some of the things you will learn – and not widely known – including NASAA’s ranking Angel investors as one of the top threats to small businesses for 2014. Yes, according to NASAA, Angel investors are a threat to small business.

Well, there is more, if you care to read. Read you should, if you care about the need for our economy to create jobs and stimulate innovation. And if you continue to remain silent, you may be complicit in the war against capital formation for small business – and voices louder and more powerful than yours may rule the day.

My July 5, 2014 SEC Comment Letter is available on the SEC’s website by clicking here.

Posted in Capital Raising, Corporate Law, Crowdfunding, General, SEC Developments, Uncategorized | Tagged , , , , , , , , , , , , , , , | 1 Comment

The Misplaced Logic of Dodd-Frank: Protecting the Ordinary Investor by Redefining the Accredited Investor

Posted on August 3, 2014 by Samuel Guzik

Dodd Frank

Many of you are still reeling from the impact of the worldwide collapse of the financial markets in 2008. And most of us have rightfully observed that following one of the greatest debacles in financial history, no one has gone to jail – no one has been prosecuted.

Stop Reckless Gambling Now Wall StreetMeanwhile, rather than look back at the carnage, Congress looked forward – and put together one of the largest and most complex pieces of legislation ever in a Democrat-controlled Congress – The Dodd Frank Act of 2010 . Its purpose: to protect financial markets and the ordinary investor. And one of the gems that emerged from the Act – the Investor Advisory Committee – charged with being the watchful eye for the ordinary investor.

Following the mandates of Dodd-Frank, the Investor Advisory Committee met at the D.C. headquarters of the SEC on July 10, 2014, ostensibly to revisit the definition of “accredited investor” under U.S. securities laws, and with a view towards presenting its recommendations to the SEC. So in light of the recent meeting of the Investor Advisory Committee, this seemed like an opportune time to take stock of exactly how the ordinary investor fares today – four years after the passage into law of Dodd-Frank.

Let’s examine some facts.

The Great Recession of 2008 marked one of the largest implosions of household wealth in U.S. history. The large majority of Americans had their investment capital parked in either IRA’s or “managed accounts ” – in hindsight, a sucker’s bet, where Blue Chip investment managers pull in billions of dollars of investment capital, largely from ordinary investors, and rake off the top an annual fee of 1.5 – 2%, win, lose or draw. And most of this money was invested in publicly traded securities, shielded from those private placements deemed “too risky” for the ordinary investor. History recalls that the financial markets were caught by surprise, and billions of dollars vanished, almost overnight, from the accounts of ordinary Americans.

United States Capitol Building StopSo how is Dodd-Frank solving this problem? Of recent moment, Dodd-Frank mandated that the SEC reconsider the definition of “accredited investor” by July 2014. Hence, the meeting of the Investor Advisory Committee. For individuals, up until now this has meant those persons earning more than $200,000 per year ($300,000 if married), or those with a personal net worth over $1 million, excluding principal residence. Seems that these benchmarks have stood almost unscathed since they were adopted by the SEC in 1982. The only modification to these 1982 benchmarks came in 2010, courtesy of Dodd-Frank, when Congress decided to exclude from the calculation the value of an individual’s principal residence. Seems that most in Congress were caught unaware with the realization that most Americans saw the value of their homes plummet – and in some cases – wiped out. Or perhaps, Congress was simply hedging its bet, in case one had any equity left in their home.

Mary Jo White Talks Investor Advisory CommitteeSo how exactly does tightening up the definition of “accredited investor” help the ordinary investor? Well, for those legally anointed as “accredited investors,” they are legally privileged to invest in private placements, investments long labeled by consumer protection groups and state securities administrators as “too risky for the ordinary investor.” And SEC Regulation D, Rule 506, makes this group an attractive source of capital for companies: issuers can raise unlimited amounts of capital from accredited investors, without the need for SEC registration, and without the need to provide any specific type of investor disclosure. Sweet.

No wonder, therefore, that billions of dollars are raised every year from accredited investors under Rule 506.

Closed Store Bureau of Labor StatisticsOn the surface, tightening up the definition of “accredited investor” may have seemed like a good idea back in 2010 – at least to the organizations/lobbyists who populated the halls of Congress while Dodd-Frank was winding its way through Congress: The Consumer Federation of America, the AFL-CIO and the North American Securities Administrators Association (NASAA). After all, who better to protect ordinary investors from risky private placements. Better to limit ordinary investors to safer investments, such as managed accounts administered by the Captains of Wall Street.

But even those who are mathematically challenged will easily conclude that raising the bar to be an accredited investor would most assuredly shrink the available pool of capital for businesses, public and private alike. And the biggest loser of all – small businesses – a group with the least number of choices for raising capital.

So who are the winners by raising the bar for defining accredited investors?

$50 GrantSeems like a good deal for FINRA regulated Wall Street funds that make a living off of managed accounts for ordinary Americans. And according to NASAA, this would be a good deal for the ordinary investor and small business. It is not surprising that FINRA and NASAA would be on the same side of the issue of shrinking the available pool of accredited investors. After all, NASAA derives a good deal of its funding from broker-dealer exams administered by – you guessed it – FINRA.

And well, in theory at least, “ordinary investors” are the real winners – protected from risky private placements – according to NASAA, historically a haven for fraudsters.

So exactly where does this leave the ordinary investor, other than with the safety of accounts managed by seasoned Wall Street professionals or, the more risky self-managed account.

Crowdfunding you say? Not so, says the AFL-CIO, the Consumer Federation of America, and NASAA – and not so fast, says the SEC.

Frankly, all of this leaves my head spinning, as should yours.

SEC Headquarters in DC

What to do about this?

Seems that at the July 10 Investor Advisory Committee meeting, Damon Silvers, an AFL-CIO representative, shared my frustration, albeit for very different reasons. At one point in the meeting he threw up his hands in frustration and stated, “perhaps we should just disband the committee and let markets decide … and the building here [the SEC] should disband.”

My suggestion to Mr. Silvers: perhaps, instead of shutting down the SEC Headquarters, a more diplomatic approach would simply be to throw up a picket line around 100 “F” Street.

Time to Take a Page from the Most Regulated Financial Market in the World

Mary Jo White and Barack Obama SECPersonally, feeling both nauseous and dizzy from the debate, I am taking my cue from President Obama, and following his lead after he learned that a U.S. Ambassador was dead – and a U.S. Consulate in flames – weeks before coming up for re-election. I am taking the weekend off and heading to Las Vegas – with the hope that in my absence better minds than mine can make some sense of this. And maybe I’ll even learn something in the process. After all, Nevada gaming is the most regulated financial market in the world – where alcohol flows freely and ordinary Americans can gamble away all of their hard earned money – 24/7. And where the myriad of carefully crafted and enforced gaming regulations leave off, the laws of mathematics will ensure the ultimate outcome – for the ordinary American.

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Intrastate Crowdfunding at Risk

Posted on July 27, 2014 by Samuel Guzik

NASAA Letter Quote North American Securities Administrators Association

Has Intrastate Crowdfunding in Washington State Been Washed Out by NASAA and the SEC?

On May 5, 2014, I published an article in Crowdfund Insider highlighting recent informal “rulemaking” at the SEC Division of Corporation Finance, which in my opinion quietly dampened the efforts of three states to implement their own brand of intrastate crowdfunding: Kansas, Georgia, and most recently, Washington State.

US Map Crowdfunding ExmemptionsA prominent feature of the Kansas, Georgia and recently enacted Washington State crowdfunding legislation: issuers would be able to crowdfund on their own website through general solicitation of investors – unlike JOBS Act crowdfunding, which mandates use of a licensed intermediary, and severely limits the ability of an issuer to call any attention to its crowdfunded offering outside of a licensed portal.

However, on April 10, 2014, the SEC Division of Corporation Finance, the same division at the SEC charged with implementing Title III (crowdfunding) legislation and Title IV (Regulation A+) under the JOBS Act, cut the heart out of three states’ intrastate crowdfunding initiatives.  The most recent victim – Washington State – whose legislature proudly enacted its own intrastate crowdfunding legislation in March 2014.

Joe WallinAs prominent Washington State corporate lawyer Joe Wallin noted in his May 6 article on Crowdfund Insider, discussing the ability of Washington businesses to solicit Washington State residents under the new Washington statute:

“Companies won’t be able to ‘generally solicit’ their offerings on the Internet for the whole world to see because that would be inconsistent with an intrastate exemption, according to the SEC.”

The SEC ruling at issue, C&DI 141.05.  As Joe Wallin pointed out:

“C&DI No. 141.05 make[s] it clear that the SEC’s position is that use of the Internet through websites and social media ‘in a broad, indiscriminate manner…to convey information about specific investment opportunities would likely’ not be compatible with the intrastate exemption.”

In fact, under the SEC ruling, an issuer utilizing the new Washington State exemption cannot even mention it is conducting fundraising on any part of its website accessible to the general public.

Question MarkThe immediate impact of this informal April 2014 SEC Staff ruling is to nullify one of the more important features of the Washington statute before it even becomes effective – the ability of an issuer to communicate with the public via the Internet to call attention to its intrastate crowdfunded offering. Thus, on April 10, 2014, the SEC stopped the Washington state legislature dead in its tracks – on the eve of the implementation of the Washington state statute.  Essentially, the SEC ruled that federal law prohibits this type of activity under the federal “intrastate” exemption that Washington State and two other states have relied on.  Why?

secIn the view of the SEC staff, the so-called federal intrastate exemption, which prohibits “offers and sales” of securities by an issuer to non-residents, would be violated if an issuer did anything on its website to call attention to the offering. It would seemingly make no difference to the SEC even if the issuer cautioned the public that the offering was only available to state residents – and even if the issuer also implemented procedures to ensure that no non-resident could actually purchase securities in the intrastate offering.

Social MediaSo while the U.S. Department of Justice is officially looking the other way while Washington State mom and pop retail businesses openly dispense marijuana to its residents, no Washington State business operating within the newly enacted Washington State crowdfunding statute can openly offer its securities to the public via the Internet –  at least not without incurring the ire of the SEC Division of Corporation Finance.  Something is wrong with this picture.

At a time when the investment crowdfunding world patiently awaits the SEC’s federal crowdfunding rules, one might ask: Why is it that Washington State residents can puff away on marijuana to their hearts’ content, in violation of federal law, while at the same time the SEC Division of Corporation Finance is putting a muzzle on Washington State’s entrepreneurs who seek to do no more than to use the Internet to reach out their residents for needed working capital?  Seems to me that being “laid back” has a higher priority at some quarters in Washington, D.C. than being “laid off.”  

Time for a Step Forward at the SEC for Crowdfunding in the Internet Age – Not a Step Backwards

Marijuana_joint smoke smoking torben hansenPerhaps the folks at the SEC’s “Corp Fin” ought to step back, take a deep breath, “inhale” and reconsider their April 10 position.

The last time that the Staff of the Division of Corporation Finance visited the issue of the utilization of the Internet in cross-border transactions, and espoused a restrictive view which parallels the view adopted in April 2014, was in 1998. Significantly, however, in 1998 the Staff noted that this restrictive policy on utilization of the Internet to solicit offers and sales would be revisited in the future – with a view towards expanding the ability of an issuer to broadcast the availability of an offering in an offer with geographical limitations:

In the context of broader Securities Act reform, we have been considering whether the current general solicitation and other offering communications restrictions on issuers and other offering participants should be modified to create greater flexibility. To the extent that we reform those restrictions on offering communications in the future, we also will consider the implications of those changes for .  .  . Internet offerings”

Congress finally spoke in the affirmative on the expanded use of general solicitation in unregistered offerings in 2012, allowing the use of general solicitation in private placements to accredited investors, whether on or off the Internet.  So one would have thought that 16 years after this change in policy was suggested by the Division of Corporation Finance, the Staff at the Division of Corporation Finance would put pen to paper – allowing capital starved small businesses to use the Internet to reach out to prospective investors in intrastate offerings.

Yet at exactly the same time when the hoped for change in policy by the SEC would have allowed the Washington State legislature to have its way – with intrastate crowdfunding – by allowing issuers to solicit investors on the Internet – the SEC publicly stood its ground on an outmoded 16 year old policy.

Why is the SEC Division of Corporation Finance Quietly Stepping on State Crowdfunding Legislation?

So the question is why did this “C & DI” come out when it did, on April 10, 2014, at a time when the SEC is by all accounts overwhelmed with rulemaking tasks and understaffed – witness the 2+ year delay in implementing federal investment crowdfunding? And just in the knick of time to stop the Washington State legislature dead in its tracks?

Thus far, the answer to this question remains unknown – as this informal rulemaking by the Division of Corporation Finance falls outside the normally transparent formal rulemaking SEC rulemaking procedures.  But for me, this gratuitous informal SEC rulemaking raises some red flags that do not bode well for small business, at least at the SEC.

What has Changed at the SEC in 2014?

Barney Frank & Chris DoddWhat has changed since 1998 at the SEC – since it promised to reconsider broadening the use of the internet by an issuer to solicit investors? Well, perhaps not coincidentally, on February 21, 2014, Rick Fleming took office as the first Chief of the Office of Investor Advocacy at the SEC, courtesy of Section 915 of the Dodd-Frank Act of 2010.  Yes, this is the same Rick Fleming who served as the North American Securities Administrators Association’s (NASAA) legal counsel before moving into his new quarters at the SEC.  Yes – the same Rick Fleming who was employed by the State of Kansas when Kansas enacted the very first intrastate crowdfunding statute in 2011 – the same Kansas statute that, but for this 2014 ruling, would allow issuers to solicit offers on their own Internet portals or other social media pursuant to the Kansas intrastate crowdfunding exemption.

Strengthening Reg D Rick Fleming NASAAWell, this is the same Rick Fleming who was listed as the NASAA contact person on a January 17, 2014 letter penned by NASAA on the eve of his appointment at the SEC.  The NASAA letter, addressed to an association of the 50 state legislatures, urged state legislatures to be mindful of a whole host of federal laws which, in their opinion, would constrict the ability of states to craft their own intrastate legislation. Included in the NASAA letter was a citation to the 1998 SEC Release.

And it is not likely that Mr. Fleming was a big fan of the 2011 Kansas crowdfunding exemption – at least not after, according to public reports, he was unceremoniously dismissed by then Kansas Securities Commissioner, Aaron Jack, the architect of the Kansas intrastate exemption.

Washington State Comes to Washington – Courtesy of NASAA

And then, something else to think about. William Beatty, the chief securities administrator for the State of Washington, and President-Elect of NASAA, was a regular visitor to Washington, D.C. in the Spring of 2014. Perhaps his most visible appearance was to testify on behalf of   before the House Financial Services Committee Subcommittee on Capital Markets – against Congressman Patrick McHenry’s draft 2014 crowdfunding bill – on May 1, 2014.

Seems that this was not the only appearance by the Washington State Securities Administrator in Washington, D.C.:

  • On April 7, 2014, Mr. Beatty and five other NASAA representatives met with SEC Commissioner Luis Aguilar to discuss the SEC’s proposed regulations under Title IV of the JOBS Act.
  • And on April 9, 2014, Mr. Beatty and seven other NASAA representatives met with the Chair of the SEC, Mary Jo White, Keith Higgins, Director of the Division of Corporation Finance and other SEC officials to discuss proposed regulations under Title IV of the JOBS Act.
  • And on April 29, 2014, Mr. Beatty and four other NASAA representatives participated in a telephone conference with SEC Commissioner Michael S. Piwowar to discuss proposed regulations under Title IV of the JOBS Act (Regulation A+)
  • And on May 9, 2014, Mr. Beatty and seven other NASAA representatives met with the Staff of the SEC to discuss proposed regulations under Title IV of the JOBS Act (Regulation A+).

NASAA LogoAnd for those of you whose imaginations run wild with conspiracy theories (like mine occasionally does), you will never guess who reached out to me on May 6, one day after I published by May 5 article on Crowdfund Insider questioning who was behind the April 10, 2014 SEC ruling? A gentleman by the name of Rex Staples.  According to his LinkedIn bio, he served for 10 years at the Washington State Securities Division before joining – you guessed it – NASAA – serving for seven years as their General Counsel.

And what do you think Mr. Staples did when we met for lunch two weeks later at a midtown Manhattan restaurant?  He pressed his smart phone into action midway through our lunch, to confirm a face-to-face meeting with one of his former subordinates, Rick Fleming, at his new digs at 100 F Street in Washington, D.C.

And what was the outcome of the meeting between Staples and Fleming two weeks later? I contacted Mr. Staples via email the day after his meeting with Chief Investor Advocate, Rick Fleming to ask him that very question.

Staples’ response: Fleming was too busy setting up his new office at the SEC to focus on anything of substance.

My response: “not too busy to squeeze out a CDI.”  Staples’ response:  “Touche”

The Wizard of OzSo who was the Wizard of Oz behind the curtain at the SEC on the April 2014 Staff ruling.  As I indicated in my May 5 article, I requested a meeting with SEC Commissioner Daniel M. Gallagher, in part to raise my concerns about this 2014 ruling.   And so we met on June 23. On this issue Commissioner Gallagher politely referred me to the Head of the Division of Corporation Finance, Keith Higgins – who officially presided over the April 2014 ruling.

I will withhold judgment on this matter, at least until I get an official answer to my question from the Division of Corporation Finance:  When is the Division of Corporation Finance going to revisit this issue as it promised to do in 1998? – of great importance to over 40 state legislatures around the country considering the contours of state crowdfunding legislation – and undoubtedly of great importance to NASAA as well.

Justic by CarptrashDraw your own conclusions – I’ve drawn mine. It appears that NASAA has landed in force at the headquarters of the SEC – replete with “boots on the ground” in the persona of Rick Fleming and a cadre of loyal constituents.  If true, this does not bode well for small business – most immediately, in terms of implementation of the JOBS Act – as many of us anxiously await implementation of JOBS Act crowdfunding and Regulation A+ by the SEC – on the heels of a massive lobbying effort by NASAA in Congress and at the SEC.

More on this in the coming days and weeks, as the search for truth and justice for small business in Washington, D.C. continues.

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JOBS Act 2.0: Congressman McHenry’s Cure for the “Six Deadly Sins” of Crowdfunding Regulation

Posted on June 3, 2014 by Samuel Guzik

Patrick McHenry Fixing the JOBS Act

For those of you who were too busy to notice, U.S. Congressman Patrick McHenry introduced three draft bills into the House Financial Services Committee last week.  One of them, if it were to become law, would open up the U.S. equity crowdfunding world in ways which only a true visionary could imagine.  Though its passage into law in the 2014 election year is far from certain, according to fellow Congressman David Schweikert, in an interview with him the day following the introduction of the far reaching draft crowdfunding bill, there is not a better “pilot” to navigate the choppy Congressional waters than Congressman McHenry.

Hitting the Crowdfunding Reset Button

One of the bills, entitled “Startup Capital Modernization Act of 2014”, is primarily directed towards fixing some of the potentially fatal defects and ambiguities embedded in the original JOBS Act bill – largely a result of last minute drafting changes in the 2012 legislative process – and compounded by proposed SEC rules –  which together threaten to kill equity crowdfunding before it even gets off the ground.

Sins of Excessive Regulations For those of you who read my earlier article,“SEC’s Proposed Crowdfunding Regulations: Six Deadly Sins,” outlining what I considered to be the major impediments in the JOBS Act rulemaking to a successful crowdfunding regimen,  the McHenry bill grants absolution for these past crowdfunding regulatory and legislative sins – and then some.  As the U.S. and the rest of the world look impatiently to Washington, D.C. for leadership in the emerging crowdfunding capital markets,. Congressman McHenry has once again stepped up to provide the type of leadership that our small businesses  (and would-be small businesses) crave.

Specifically, Congressman McHenry’s proposed Title III redo accomplishes a great deal.  Here are some of the highlights:

  • Raises crowdfunding limits from $1 million to up to $5 million.
  • Allows self –certified financials for raises under $500,000 – and independently reviewed financials statements for raises between $500,000 and $3 million – leaving the more onerous audited financials for raises above $3 million.
  • Eliminates the requirement that the SEC promulgate rules requiring detailed, registration statement-like non-financial disclosure resembling a public company report.
  • Eliminates the need for ongoing annual reporting in perpetuity.
  • Allows non-broker-dealer intermediaries (funding portals) to register only with the SEC, avoiding registration with FINRA and compliance with its rules.
  • Allows intermediaries which are not licensed broker-dealers to “curate” crowdfunded transactions, screening out those not deemed suitable for their portal.
  • Removes the more onerous liability provisions for intermediaries and issuers.

Żmurko_Sinner's_past Sin  Though some may debate the wisdom of raising the current $1 million crowdfunding dollar limit before this nascent ecosystem is even open for business, it certainly underscores headline grabbing successes with heftier raises in the rewards based crowdfunding domain – Oculus being the crowdfunding success du jour. (Kudos to the brave and lucky Oculus lawyer who took his fees in Oculus stock!)

Perhaps less apparent, however, is the impact the proposed bill could have on intrastate crowdfunding. If the McHenry JOBS Act 2.0 were to become law, it would dwarf, and in many instances make largely superfluous, the developing intrastate crowdfunding ecosystem.  Though states would remain free to create their own crowdfunding ecosystems within their borders, the McHenry bill would generally provide a more attractive alternative – its reach extending well beyond state borders.

A Quiet Assault on Small Business by the SEC – The Seventh Deadly Sin

The proposed McHenry crowdfunding bill, though far reaching, would leave untouched a recent informal pronouncement by the SEC Staff, issued below the radar of Congress and crowdfunding supporters (and perhaps even the SEC Commissioners) -which, from my point of view, is questionable on its merits and goes against the grain of the of the entrepreneurial spirit which crowdfunding exemplifies.  Even more troubling, the ruling suggests a “backdoor” approach to SEC rulemaking – at least where the interests of small business are concerned.

Specifically, until April 10, 2014, it would appear by all accounts that a state legislature would be free to fashion a crowdfunding regime within its borders which would allow an issuer to throw up a crowdfunding campaign on its own internet site – without the need to utilize an intermediary – be it a licensed broker-dealer or otherwise.

However, on April 10, 2014, the SEC Staff put a chill on any thoughts a state legislature might have to craft an intrastate crowdfunding structure which would permit an issuer to conduct its own crowdfunding campaign – on its own website.

SEC Headquarters in DC  On April 10, 2014, the Staff of the SEC’s Division of Corporation Finance quietly issued a tersely wordedinterpretive ruling, which sent a chilling message to the 50 states and their legislatures: in the opinion of the Staff of the SEC Division of Corporation Finance, an issuer would be violating the Securities Act of 1933, which regulates the sale of securities by an issuer of securities, if it conducted an otherwise lawful intrastate crowdfunded offering on its own website, bypassing a licensed intermediary.   However, the Staff ruled, the same activity by a licensed broker-dealer would not invalidate an otherwise lawful intrastate sale of securities. This SEC ruling, if valid, would trump any state crowdfunding legislation to the contrary.

It seems that the Staff at the SEC Division of Corporation Finance is not (yet) willing to allow small business crowdfunders to disintermediate a licensed broker-dealer intermediary – a Staff goal undoubtedly shared by organizations such as the North American Securities Administrators Association, Inc. (NASAA), a powerful national lobbying organization of state securities administrators which derives a portion of its financial support from FINRA administered state broker licensing exams. Yes, that’s right – an international lobbying organization inclusive of Canada and Mexico which derives direct financial support from these state exams.

However, what is most perplexing, indeed disturbing, is that this informal ruling by the SEC Staff represents a 180 degree about face from a lengthy, well reasoned interpretive release issued by the SEC in 1998 in a parallel situation involving cross-border international offerings on the internet by U.S. companies – to the effect that any limitations on internet solicitations by an issuer would be less Megaphone restrictive than those faced under federal law for a licensed broker-dealer.  So it seems the Staff quietly took a major step backwards on April 10, 2014, when faced with an analogous situation involving U.S. intrastate crowdfunded offerings.

So while the crowdfunding world is keenly focused on a much delayed 585 page SEC release, and the SEC publicly bemoans a more than five year rulemaking backlog, the Staff at the SEC’s Division of Corporation Finance has found the time togratuitously issue a ruling which interferes with a state’s ability to fashion its own crowdfunding regime.  And perhaps even more perplexing – no one outside the SEC had even asked for this ruling – at least not through formal, transparent channels.

So what prompted this Staff ruling – and what can and should be done to avoid further informal, intrusions which threaten to hijack state legislative measures such as intrastate crowdfunding,  at the expense of small business, by circumventing more transparent rulemaking processes?

Fat Lady Painting This is precisely the question I intend to ask Commissioner Daniel Gallagher in a meeting I have formally requested with him – to discuss the procedures which led up to this ruling under the noses of five SEC Commissioners– and what can and should be done to prevent future missteps.  I have my theory as to what prompted this ruling– which, if accurate, does not bode well for small business capital formation in matters going beyond the scope of the April 10 ruling.

Stay tuned.  The fat lady is just getting warmed up.   Hopefully Washington will be listening.

 

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MIT Panel Discussion: Can Crowdfunding Democratize Access to Capital?

Posted on June 3, 2014 by Samuel Guzik

Following is a Crowdfunding Roundtable I participated in at the MIT Sloan School of Business on May 19, 2014, which included my presentation on the SEC’s proposed Regulation A+:

May 19 @ 1:00 pm – 2:00 pm

Event Details

The MIT Innovation Initiative and the MIT Sloan School of Management will convene a roundtable and panel on: “Challenges of the Innovation Economy Roundtable and Panel: Can Crowdfunding Change Innovation?”. The objective of the forum is to solicit feedback from entrepreneurs, academics, angel and venture capital investors, crowdfunding platforms and policy makers on the proposed SEC regulations, and to discuss how the changes will provide new opportunities and challenges for innovation driven entrepreneurs and investors.

MIT Sloan School of Management
100 Main Street, Building E62, Room #E62-233
Cambridge, MA 02142

Agenda

Welcome Remarks (10 minutes)

Professor Fiona Murray – Co-Director, MIT Innovation Initiative, Associate Dean for Innovation at MIT Sloan School of Management, Alvin J. Siteman (1948) Professor of Entrepreneurship

Simple Economics of Crowdfunding (10 minutes)

Professor Christian Catalini – Assistant Professor of Technological Innovation, Entrepreneurship, and Strategic Management

Panel Discussion and Public Q&A (40 minutes)

Panelists:

  • Ajay Agrawal (University of Toronto)
  • Alex Mittal (FundersClub)
  • Elliot Schneier, (Fundable.com)
  • Jean Hammond (LearnLaunchX)
  • Jeff Fagnan (Atlas Venture)
  • Sam Guzik (Guzik & Associates)
  • Thos Niles (Dragon Innovation)

Moderators:

  • Jay Finch (US Treasury)
  • Christian Catalini (MIT)

Details

Date:
May 19, 2014
Time:
1:00 pm – 2:00 pm
Event Tags:
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Regulation A+: A Sleeping Giant For Small Business Capital Formation?

Posted on June 3, 2014 by Samuel Guzik

The Potential for Regulation A and Blue Sky Pre-emption

Since the 1930’s Regulation A has been unremarkable as a little known and little used “exemption” from the full SEC registration process – intended to allow smaller companies to access public markets through a streamlined SEC registration process – with “reviewed” financial statements and no ongoing reporting requirements. Until recently the amount that could be raisedunder Regulation A was limited to $5 million, a benchmark not revisited by Congress for more than 30 years.

Cost of RegulationsThe problem? – the cost-benefit calculus. Navigating the SEC review process was necessary – but not sufficient – to complete a Regulation A offering. A small company seeking to utilize Regulation A was met with a dizzying array of state “blue sky” regulations, each with its own filing and review process. And for companies with the resolve and fortitude to embark upon the Regulation A path – there were some absolute showstoppers. For example, a life sciences company with no hope of either revenues or profits in the near term – situated in the wrong state – would find the Regulation A door shut tight.

State of the Union Congress and Senate Then came Title IV of the JOBS Act of 2012, entitled “Small Company Capital Formation.” Congress recognized both the importance of an easier (as in less costly) path for small business to access public markets and maintain public company status – especially one that did not require a company to comply with cumbersome, often insurmountable state-level merit review. So Congress created a new and improved Regulation A, to supplement the dormant exemption. The price of admission: audited financial statements, both at the time of registration and annually thereafter; a lighter ongoing reporting regimen –– and the brass ring – exemption from blue sky review for offerings to “qualified purchasers -” the fine details being left to rulemaking at the SEC.

Despite this new and promising pathway to the public markets for smaller issuers, many prognosticators were still not very sanguine about the prospects for Title IV’s implementation. Unlike Title I of the JOBS Act, which was self-implementing – and Titles II and III, each with its own statutory deadline for SEC rulemaking – Congress provided no timetable for the rule-dependent exemption. Some pronounced it dead on arrival – with implementation dependent upon SEC rulemaking and sitting in line behind a five year+ backlog of SEC Dodd-Frank rulemaking.

What a Difference a New SEC Chair Makes

Mary Jo White Chair SEC  Renewed hope for Regulation A came unexpectedly following a changing of the guard at the SEC Chair level – from Mary Jo Shapiro to Mary Jo White. On December 18, 2013, the Commission approved the issuance of proposed rules intended to implement what was informally christened as “Regulation A+.” Perhaps more surprisingly than the issuance of the proposed rules itself was the SEC’s pronouncement that all investors would be deemed “qualified investors” for purposes of the new and improved Regulation A+.

The proposed rules were greeted by many on Wall Street and in the small business community as a potential game changer for small business and the tepid small cap IPO market. But others, most notably the North American Securities Administrators Association (NASAA) cried foul – claiming that the SEC had not played the game by the rules set by Congress. Instead, they argued that the SEC exceeded its authority by broadly defining “qualified purchasers” to include all purchasers. And they continue to cry loudly as the SEC mulls over the final rules.

galvin_bio  It started with a visit to the SEC by William Galvin, Massachusetts Secretary of State and chief state securities regulator – eight days before the proposed rules were even issued! And the disdain of Massachusetts’s regulators was punctuated by a terse comment letter submitted by Secretary Galvin on the very same day the proposed rules were issued. This was to be the beginning of a war centered around blue sky pre-emption, at least as far as Regulation A and unaccredited investors were to be concerned. By time the official public comment had closed on the proposed Regulation A rules on March 24, state administrators had submitted a multitude of comment letters railing against the SEC’s broad pre-emption of their authority– and the jeopardy it created for the investor citizenry of their respective states. However, by all accounts it appears that NASAA has yet to get its way with the SEC – and in this writer’s opinion it is highly doubtful that it will.

Blue Sky Ahead for Regulation A+?

andrea-seidt-nasaa  Many industry supporters were alarmed at the news which surfaced three days after the Regulation A comment period closed, as reported in an article which appeared on Reuters on March 27. The headline: “State Regulators Hire Outside Lawyer for Turf War With U.S. SEC.” According to the article, NASAA had retained Tom Sporkin, a seasoned securities litigator who cut his teeth at the SEC’s Enforcement Division for nearly 20 years, now with the firm of BuckleySandler LLP in Washington. Andrea Seidt, President of NASAA and chief securities officer for the state of Ohio, said of Sporkin’s role: “We certainly value his input. He is helping us solidify our thinking.” A good idea indeed, before NASAA considers upping the ante in its confrontation with the SEC.

SEC Small Business Capital Formation 2012  As a securities lawyer practicing for more than 35 years I was initially surprised by the SEC’s bold move to pre-empt blue sky review for offerings involving unaccredited investors. However, a closer look has led me to conclude that the SEC has constructed an elegant (and lawful) paradigm for bringing unaccredited investors into the Regulation A+ “qualified purchaser” circle. In addition to incorporating investor protection measures dictated in the federal legislation itself (audited financial statements, periodic ongoing disclosure) the SEC has taken the further step of limiting the amount that any investor can make in a Regulation A offering to 10% of an investor’s net worth or income, whichever is greater – thereby qualifying all investors for a Title IV Regulation A+ offering.

Rutherford B Campbell  And the SEC’s solution has found support in one of the most recognized and respected academic advocates of securities reform – Professor Rutheford B. Campbell, who has been a prolific writer in support of reduced SEC regulation for small business, and a regular contributor to the SEC rulemaking comment process. Professor Campbell, who sports an advanced law degree from Harvard Law School, brings more than “academic cred” to the party. Before he segwayed from law school to the ivory towers of academia, he practiced law as an associate at White & Case in New York City and later as a partner with Stoll, Keenon & Park in Lexington, Kentucky. Indeed his comment letters which preceded the issuance of the proposed rules appear to be the very blueprint which the SEC followed in crafting the proposed rules’ inclusive approach to broadly defining the term “qualified purchaser.”

Carriage Clock Time From my point of view, the days of Regulation A+ are numbered – not by the shadow cast by NASAA over the rulemaking process which threatens to strangle Regulation A+ before it is born – but rather by the number of days remaining in the 2014 calendar year. Chair White has gone on record as stating that completion of the Regulation A+ rules is a high priority at the Commission for 2014. I am hopeful that when the dust settles and final rules are issued by the Commission, both small businesses and unaccredited investors alike will be able to declare victory in the form of new Regulation A+.

Waning Influence of NASAA

NASAA has historically been a powerful and effective advocate in Congress and at the SEC – their mission: to protect investors at the state regulator level from fraud and risky investments – their principal tool – “merit review” – allowing what some have characterized as imposing their “arbitrary” judgment of the quality of investments on the will of small businesses and investors alike. However, a closer look suggests that their power is waning.

  • A Vocal Minority? NASAA as an organization and a number of individual member state representatives have been vocal critics of Regulation A+. However, at last count less than 20 of the 50 member state administrators have either expressly signed onto the NASAA comment letters or independently submitted their own comment letters.
  • The Terra Firma is Beginning to Crumble – Anecdotal evidence is building to support the conclusion that the goals and policies of NASAA are not always in synch with the various state legislatures – perhaps a more compelling barometer of sound public policy than state securities administrators. Case in point: investment crowdfunding. Notwithstanding this financing vehicle recently being labeled by NASAA as one of the top ten threats to investors, more than 10 state legislatures have considered investment crowdfunding bills, and the number of states that have passed state investment crowdfunding legislation is growing by the month. The reason? Opening up capital for small business creates jobs – and keeps both businesses and investment capital within its borders – issues that trump investor protection at the state level in a stagnating economy.
  • canon gun shoot  Bringing in the Big Guns After the Comment Period Ended – One must question the strategy behind bringing in a hired gun in the form of former SEC regulator Gary Sporkin, publicly announced only three days after the rulemaking comment period ended. This does not appear to be an encouraging bellwether for NASAA on the heels of its concerted effort to influence the SEC during the comment period.

Congressional Policy

A cursory examination of Title IV of the JOBS Act reveals two things: the unmistakable intention of Congress to open up Regulation A+ as powerful tool for capital formation – raising the ceiling to $50 million – indeed mandating that this ceiling be revisited by the SEC every two years; and the broad discretion Congress gave to the SEC to implement Title IV provisions through rulemaking.

SEC Policies

After nearly 80 years of relative obscurity, Regulation A+ appears to find itself at the intersection of a number high level SEC policy initiatives. In particular, there has been a recognition at the SEC of the need for viable secondary markets which serve smaller issuers – one example being Commissioner Gallagher’s calls for newly created “venture exchanges.” Then there is the recently revitalized SEC initiative to study and implement “scaled disclosure” in order to reduce the regulatory burdens and costs on small business. And finally, the SEC is well aware of the decline in the smaller IPO market, a result of a confluence of factors – including the increasing costs of achieving and maintaining public company status. A properly crafted Regulation A+, incorporating SEC review in (hopefully) an abbreviated registration process and lighter ongoing disclosure would seem to be the ticket to implementing all of these policies.

The SEC seems to have figured this all this out – and factored this in – when it decided to take a bold and aggressive stance in the proposed regulations – by including all investors as eligible investors in a Regulation A+ offering. Much as Luis A. Aguilar  investors believe that their judgment should not be supplanted by the judgment of state regulators – so too, I suspect the SEC will remain confident in its preliminary judgment of the matter.

And for those who like to read tea leaves, there was no red meat inCommissioner Luis Aguilar’s remarks to attendees at The NASAA 2014 Public Policy Conference on April 8 in Washington, D.C.:

“In that regard, however, it is important to note that the Commission’s proposing release expressly solicited comment on whether we should take a different approach to preemption at the adopting stage—and if so, what that approach should require. In other words, this is an issue that has not yet been foreclosed.” [emphasis added]

Considering the fact that not only is Commissioner Aguilar one of the most outspoken Commission members on the issue of investor protection, not to mention his self-described role in his remarks as “informal liason” between NASAA and the SEC, I doubt that this was the type of “red meat” that NASAA conference attendees were looking for.

Washington Politics

My expectation is that NASAA will continue to bark loudly at the SEC, but at the end of the day it will not bite. In this game of high stakes poker between the SEC and NASAA, NASAA can ill afford to be, “all in.” Any litigation which NASAA might institute to block state preemption would likely prove to be a sucker’s bet –garnering ill will in Congress – and, sooner or later, inevitable legislative backlash. After all, small businesses and IPO’s are major job creators. Jobs and the economy are kitchen table issues which drive voters – not so, investor protection concerns. And job creation (or the lack thereof) cuts across broad voter demographics. NASAA’s President Seidt seemed to recognize this stark reality, in describing the role of NASAA’s newly hired legal gun: “He is helping us solidify our thinking.”

United States Capitol Building Stop And drums are already beating behind closed doors on Capitol Hill to correct any “missteps” that either the SEC or any Court might be inclined to make. Undoubtedly, the Commission’s ear is close to the ground in Washington.

If NASAA pulls the trigger by initiating rule blocking litigation, it will likely not survive the recoil. And if the SEC becomes “gun shy” – it will only be a matter of time before the Capitol Hill cavalry arrives – asking what was wrong with the SEC’s elegantly crafted and balanced solution to serving both investors and capital formation, with carefully constructed investor protection measures.

 

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Samuel Guzik Joins Congressman Patrick McHenry in SEC Regulation A Webinar on March 13

Posted on March 11, 2014 by Samuel Guzik

patrick-mchenry-200x302

Please join Congressman Patrick McHenry and attorneys Samuel Guzik and David N. Feldman in a one hour Webinar to be held on March 13, 2014, 1;30 pm, EDT,.  The Webinar will be moderated by Dara Albright, of NowStreet Wire.

The Webinar will focus on the SEC’s proposed Regulation A+ rules announced in December 2013, promulgated under Title IV of the JOBS Act of 2012. Regulation A+ promises to revitalize the smaller IPO market for raises up to $50 million. As proposed, Regulation A+ would permit a company to conduct an IPO under a streamlined SEC registration process, with lighter ongoing disclosure than is available to companies going public through a traditional SEC registration.  The Webinar will address both the fundamentals of Regulation A+, and how it can be expected to be useful for smaller companies, either as a traditional IPO or as a “crowd funded” offering to the public, for offerings up to $50 million.

Congressman McHenry, a principal sponsor of the JOBS Act, is expected to address issues of concern which have arisen following adoption of the JOBS Act in 2012, as well as the prospects for “JOBS Act 2.0,” future legislation to address issues which threaten to impair the effectiveness of the enacted JOBS Act provisions.

This Webinar is the first in a series of Webinars with Samuel S. Guzik and David N. Feldman, both attorneys with Richardson Patel LLP, addressing developing issues  relating to the effective utilization of Regulation A+ as a vehicle to revitalize the smaller IPO market. Regulation A+ is expected to be operational in 2014 following the issuance by the SEC of final rules.

For those wishing to view the Webinar live, or to view a recording of the Webinar after the event, please click here for additional information.

A special thanks to Dara Albright of NowStreet Wire for organizing this timely Webinar. NowStreet Wire is the preeminent resource for education and insight into the burgeoning industry of global crowdfinance. Since 2012, NowStreet’s Capitalizing on Financial Innovation webinar channel has been helping the financial community as well as the investing public prepare for the rise of the crowdfinance industry. NowStreet Wire was founded by Dara Albright, a thought provoker and frequent speaker on topics relating to market structure, private secondary transactions and crowdfinance.

And for those of you who want to know what Congressman McHenry is  Tweeting about today – his recommended reading for those who care about helping small businesses grow:

 

 

 

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Samuel S. Guzik Publishes Second JOBS Act Article in The Harvard Law School Forum in 2014

Posted on March 9, 2014 by Samuel Guzik

Today’s edition of The Harvard Law School Forum on Corporate Governance and Financial Regulation features an article written by me, entitled “SEC Crowdfunding Rulemaking under the JOBS Act – An Opportunity Lost?”  The article is an analysis of choices and challenges of the SEC in its proposed rules implementing the JOBS Act Title III “investment crowdfunding” provisions – contained in a 585 page SEC Release.  Final SEC rules implementing the crowdfunding provisions of the JOBS Act are expected later in 2014.

This is the second article of mine in to appear in 2014 in The Harvard Law School Forum addressing ongoing SEC rulemaking under the JOBS Act of 2012.  The first article, entitled “Regulation A+ Offerings – A New Era at the SEC,” published in January 2014, addresses legislative and SEC rulemaking activity under Title IV of the JOBS Act, so-called “Regulation A+,” which not only promises to revitalize the capital markets for smaller IPO’s, but also presents an opportunity for the SEC to implement “CrowdfundingPlus,” through Regulation A+’s streamlined SEC review process, a vehicle which would allow small businesses to utilize the dynamics of a crowdfunded offering for raises over $1 million.

To read today’s article in The Harvard Law School Forum, click here.

For more on the potential of Regulation A+ to revitalize the smaller IPO market, and CrowdfundingPlus,  see my interview in Equities.com on March 7, 2014, which can be accessed by clicking here.

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Samuel Guzik Interviewed in Equities.com on SEC Regulation A+

Posted on March 7, 2014 by Samuel Guzik

Today’s issue of Equities.com features an interview with me, discussing issues and opportunities regarding the SEC’s proposed rules on Regulation A+.  The article is entitled “Can Reg A Crowdfunding Displace the Smaller IPO.”

The article addresses some practical issues companies may face when Regulation A+ becomes available, expected to be later in 2014. It also discusses the potential that the SEC rulemaking presents to use Regulation A+ as a crowdfunding vehicle for crowdfunded offerings over $1 million – what I term “CrowdfundingPlus.”

Here is a link to today’s article in Equities.com.

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