December 2, 2013
I served as a Colorado prosecutor for thirty years. The final twelve, I investigated and prosecuted securities fraud. I have been an instructor for the National White Collar Crime Center for eighteen years.
You note on Page 143 that by limiting the procedures intermediaries must follow to reduce the risk of fraud, "we believe that this proposed approach would allow an intermediary to use its experience and judgment, as well as its concern for the reputational integrity of its platform and Crowdfunding . . . in general, to design systems and processes to help reduce the risk of fraud in securities-based Crowdfunding."
However, on Pages 130 and 131, you note that the proposed rules ". . . do not independently establish licensing or other qualifications for intermediaries and their associated persons." To my mind, you have assumed "experience and judgment" on the part of intermediaries, but, without minimum qualifications, testing, and licensure, done nothing to assure them. Furthermore, concern for the integrity of the platform and Crowdfunding as well as the ability to design systems to reduce fraud can only come from those knowledgeable about securities who are able to pass some type of testing.
There is no question as to what entity should create the minimum qualifications, testing and licensure requirements, i.e., the SEC. FINRA is neither designed nor staffed to address the potential for fraud on the part of intermediaries. At no time in its history has the SEC been better positioned to take on this responsibility, because at no other time has it had a leader like Mary Jo White. Who better understands the potential for fraud under Crowdfunding, especially with the portals. Who better to guide, and ultimately approve of, the creation of qualifications for, testing of, and licensure of intermediaries.