Subject: File No. JOBS Act Title III
From: John R Fahy
Affiliation: Partner, Whitaker Chalk Swindle Schwartz PLLC

November 8, 2012

I am a practicing securities attorney and vice-chair of the Securities Law Committee of the Business Law Section of the State Bar of Texas. But, this comment is not made on behalf of the Securities Law Committee.
While Title III of the JOBS Act has a fair amount of complexity, I use this comment to focus on only one provision.

Securities Act of 1933 4(6)(D) and 4A(b)(4) (15 U.S.C. 77d(6)(D) and 77d-1(b)(4)) appear to require that Crowdfunding issuers file results of operations and financial statements no less than annually with the SEC in order to comply with the Crowdfunding securities registration exemption under the Securities Act.

If this provision is interpreted to require the filing of these annual reports as a condition of the Crowdfunding registration exemption, this would cause a substantial change in the basic understanding of securities registration exemptions. To my understanding, compliance with every other securities registration exemption is determined at the time of the transaction. Securities attorneys and brokers working or opining on the securities transaction will have sufficient information before them at the time of the transaction to provide the foundation for determining whether the transaction complied with an exemption under the Securities Act.

But the annual filing of the results of operations and financial statements element of the Crowdfunding exemption is a future condition element. Whether the issuer has fulfilled this condition and thus complied with the Crowdfunding exemption will not be known at the time of the transaction.

This puts the issuer, its principals, securities attorneys and securities brokers in an awkward position. Because of the future performance element condition of the Crowdfunding exemption, these persons will not be able to have confidence that the Crowdfunding exemption has been fulfilled at the time they sell the securities or do their work.

For example, should a company principal leave company employment, that principal could be held liable for state or federal securities registration violations, principally or aiding and abetting, if the Crowdfunding issuer does not file required reports after his or her departure. Moreover, an attorney or securities broker working on the transaction would have similar concerns about securities registration aiding and abetting liability under state of federal law based on the Crowdfunding issuer's failure to file financial statements. Legal opinions as to securities registration compliance will inevitably include a carveout for future compliance with the annual results of operations and financial statements requirements that would make such opinions less than useful.

I know that I would not care to be involved in a Crowdfunding transaction if I have to rely for a securities registration exemption upon the issuer's future compliance with SEC filing requirements ior the issuer's results of operations and financial statements.

The JOBS Act gives the SEC authority to determine how many years of results of operations and financial statements must be filed in the future to comply with the Crowdfunding exemption. I recommend that the Commission use zero years for determining whether a Crowdfunding transaction complied with the exemption. But, I also think that the Congressional intent behind can be fulfilled by requiring Crowdfunding issuers to file the results of operations and financial statements, just not as a condition of the securities registration exemption.

Thank you for your consideration.

John R. Fahy
817-878-0547
Whitaker Chalk Swindle Schwartz PLLC
301 Commerce St.
Suite 3500
Fort Worth, TX 76102