Avoid blue lights in your rearview mirror – comply with S.E.C. Rules

By Hector Botero  CrowdFundBeat Sr. Contributing  Editor, President & CEO at iCrowdNewswire, LLC

It has always been part of the deal. It will become more and more prevalent. It is the law. It is not a good thing it is a great thing. It can be easy and affordable. Don’t comply and look out for the investor that buys one share in your equity crowdfunding campaign, waits for something to go wrong, and sues you for misleading investors and failing to comply with federal U.S. Securities and Exchange Commission disclosure regulations!

One more time, this is a great thing. It will make crowdfunding more transparent, positively regulated, secure and at the end of the day help the best thing to happen to financial markets in a long time become orderly and grow, creating a much more secure investment ecosystem for investors. All of this results in growth and that is why I say it is a great thing.

Platforms involved in equity crowdfunding are going to have to mandate that equity campaigns are in compliance – as I have said many times, at the end of the day platforms will have to behave much like traditional stock exchanges in the sense of becoming self-regulating organizations or SROs as it is commonly known. The choices are self-regulate or wait for the government to come in and do it for you. One way or the other it will happen, so why not mandate that equity raising campaigns are in compliance with U.S. Securities and Exchange Commission regulations,  even offer the compliance services, create a revenue stream from this – or deny them access to your platform and avoid the investor wrath when problems arise?

This will become a competitive advantage amongst platforms – those that offer investor relations and compliance services – and those that don’t. In fact why platforms are not bundling investor relations programs with listings is beyond me – stock exchanges do it. It promotes liquidity (investment) in campaigns which is ultimately great for the platforms. It promotes the platforms which is great for the platforms. It is a solid source of revenues, recently the NASDAQ reported larger income from services than trading fees. Oh and yes, for the sake of full disclosure this is somewhat self-serving – we are a media company providing investor relations and regulatory disclosure services. But do it with us or do with whomever, do this, it will make the industry grow for everyone concerned including yourself.

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In June after 80 years of prohibition with the passing of Title IV of the JOBS Act non-accredited investors were able to invest in Regulation A+ equity crowdfunding raises, Tier I allowing up to $20 million and Tier II up to $50 million. This is the higher end of the crowdfunding range as now planned and it is regulated, Reg. A and Reg. A+ filing and other requirements are in place and companies must comply – that seems easy enough when raising that amount of money, after all, without sophisticated advisors, lawyers, auditors and financial teams it just won’t happen.

But where the rush will come, in my opinion, is with the Regulation D equity crowdfunding raises which is where small and medium size companies (SMEs) will be able to raise up to $500,000 with a much lower threshold of regulations. I said LOWER and not no regulations. This is the truly revolutionary part of the JOBS Act. Regulation D Title III (hopefully coming early 2016) allowing companies to sell equity and raise up to a half a million dollars with a simplified and streamlined SEC filing structure, simplified financial reporting and really, simplified everything. It is where the brilliant revolution takes place. It is where innovation, efficiencies and explosive growth will take place. And it is where ‘Caveat Emptor’ or buyer beware becomes more prominent and “Caveat Venditor” or seller be ware becomes do or die!

The point is it is not that hard. It is not expensive, depending on whom you buy services from. There are plenty of resources and as I say over and over it is ultimately great for everyone concerned. But most important it is the law and fundraising without complying is like driving without a license, it’s all good until you look in the rearview mirror and see the blue lights flashing. And then we all know what is next: hands against the car, feet back and spread them!

It has always been part of the deal. It will become more and more prevalent. It is the law. It is not a good thing it is a great thing. It can be easy and affordable. Don’t comply and look out for the investor that buys one share in your equity crowdfunding campaign, waits for something to go wrong, and sues you for misleading investors and failing to comply with federal U.S. Securities and Exchange Commission disclosure regulations!

One more time, this is a great thing. It will make crowdfunding more transparent, positively regulated, secure and at the end of the day help the best thing to happen to financial markets in a long time become orderly and grow, creating a much more secure investment ecosystem for investors. All of this results in growth and that is why I say it is a great thing.

Platforms involved in equity crowdfunding are going to have to mandate that equity campaigns are in compliance – as I have said many times, at the end of the day platforms will have to behave much like traditional stock exchanges in the sense of becoming self-regulating organizations or SROs as it is commonly known. The choices are self-regulate or wait for the government to come in and do it for you. One way or the other it will happen, so why not mandate that equity raising campaigns are in compliance with U.S. Securities and Exchange Commission regulations,  even offer the compliance services, create a revenue stream from this – or deny them access to your platform and avoid the investor wrath when problems arise?

This will become a competitive advantage amongst platforms – those that offer investor relations and compliance services – and those that don’t. In fact why platforms are not bundling investor relations programs with listings is beyond me – stock exchanges do it. It promotes liquidity (investment) in campaigns which is ultimately great for the platforms. It promotes the platforms which is great for the platforms. It is a solid source of revenues, recently the NASDAQ reported larger income from services than trading fees. Oh and yes, for the sake of full disclosure this is somewhat self-serving – we are a media company providing investor relations and regulatory disclosure services. But do it with us or do with whomever, do this, it will make the industry grow for everyone concerned including yourself.

In June after 80 years of prohibition with the passing of Title IV of the JOBS Act non-accredited investors were able to invest in Regulation A+ equity crowdfunding raises, Tier I allowing up to $20 million and Tier II up to $50 million. This is the higher end of the crowdfunding range as now planned and it is regulated, Reg. A and Reg. A+ filing and other requirements are in place and companies must comply – that seems easy enough when raising that amount of money, after all, without sophisticated advisors, lawyers, auditors and financial teams it just won’t happen.

But where the rush will come, in my opinion, is with the Regulation D equity crowdfunding raises which is where small and medium size companies (SMEs) will be able to raise up to $500,000 with a much lower threshold of regulations. I said LOWER and not no regulations. This is the truly revolutionary part of the JOBS Act. Regulation D Title III (hopefully coming early 2016) allowing companies to sell equity and raise up to a half a million dollars with a simplified and streamlined SEC filing structure, simplified financial reporting and really, simplified everything. It is where the brilliant revolution takes place. It is where innovation, efficiencies and explosive growth will take place. And it is where ‘Caveat Emptor’ or buyer beware becomes more prominent and “Caveat Venditor” or seller be ware becomes do or die!

The point is it is not that hard. It is not expensive, depending on whom you buy services from. There are plenty of resources and as I say over and over it is ultimately great for everyone concerned. But most important it is the law and fundraising without complying is like driving without a license, it’s all good until you look in the rearview mirror and see the blue lights flashing. And then we all know what is next: hands against the car, feet back and spread them!

 

 

 

 

 

 

 

 

Written by
Hector Botero

Tags: , , ,

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