October 30, 2013
1) Issuers should not be restricted to one “intermediary” or even one type of funding. Section 4(a)(6).
New companies, startups, are trying to raise enough money to hire the people they need to get their company off the ground. These companies should be able to seek accredited investors and non-accredited investors alike. The SEC should not impose a restriction of one “intermediary” because they believe “it would be easier for investors to communicate with each other if they only used one platform”.
The idea of the “wisdom of the crowd” is foolish. Crowdfunding is a way for the smaller investors to learn about the early stage opportunities available to them, and to make small investments in such companies. It is unlikely that communication with other small investors will be more important than the investor’s interpretation and assessment of the issuers business plan and related documentation. Small investors are not stupid, and should not be treated as such. The idea of a “Crowd” is that a lot of small investors decide individually to invest in one company, not that a group of small investors decide together if they should invest in one company.
The issuer should be able to use a variety of intermediaries and structures. The issuer should be able to have a 504/505/506 offering at the same time as a Crowdfunding offering. This would allow the issuer to accept accredited investors, as well as non-accredited investors. The non-accredited investors in this case will be able to learn via communication with the more experienced accredited investors. This is a win for all parties.
The purpose of the JOBS ACT is to create jobs. Issuers need to raise money in order to create these jobs. Restricting them to one intermediary and/or one funding mechanism will make it more difficult to raise the capital required.
2)“Crowdfunding” should not be restricted to Online-Only. Section 4(a)(6)(C).
“Crowdfunding” should not be restricted to Online-Only. The purpose of “Crowdfunding” is to allow smaller non-accredited investors to invest in early stage companies. It is not important how the smaller investor learned about the early stage company. If an issuer’s non-accredited neighbor wanted to invest $10,000 in his neighbor’s company, he should be able to. There should be no “Online-only” requirement.
3) “Funding Portals” should not be required to register with the SEC or FINRA. Section 4A(a)(1).
“Funding Portals” are an information delivery service. They do not recommend or encourage investors to buy securities such as a Broker Dealer, therefor, there is no reason they be encumbered with the regulation and expense of SEC and FINRA registration. The issuer using the “Portal” should comply with the SEC rules appropriate for an issuer.
The “Funding Portal” is not acting like a Broker Dealer, and not working “with” the issuer to present the security, as would a Broker Dealer. The “Funding Portal” is acting more like a newspaper, providing a space for the issuer to “advertise” his offering to accredited and non-accredited investors. The transaction is then completed by the issuer and the investor, without the counsel and most likely, without the knowledge of the “Funding Portal”.
“Funding Portals” should not be encumbered with regulation and expense by being required to register with the SEC or FINRA.
Frederick C. Young
Perfect Circle Solutions
3915 Mission Ave. ste D1-431
Oceanside, CA 92058