Subject: File No. S7-09-13
From: Elan Amram

February 3, 2014

When purchasing stocks in any company today, you open an account with an online trading platform and place an order for any company that trades on an exchange. Its a simple process to buy and sell a single share or more. You are never told, who you can sell your investment to, or even when you may sell your stock. The process is simple so that there would be a market available and a price is developed for your investment.

The SEC has, however, determined that any security from a crowdfunded offering be restricted from sale for a period of one year.


We believe that including such proposed restrictions is important for investor protection. By restricting the transfer of securities for a one-year period, the proposed rules would give investors in a business a defined period to observe the performance of the business and to potentially obtain more information about the potential success or failure of the business before trading occurs. The restrictions on resales, however, may impede price discovery.

In a free market, the investor should be given the opportunity to sell their investment the next day should they wish. If an offering is a success and the demand exists from a third party to purchase your investment at a higher price, why should you not have the ability to sell for a profit. The demand may not last the entire year and the price after the restriction is lifted may not be as high.

The proposed one-year restriction on transfers of securities purchased in a transaction conducted in reliance on Section 4(a)(6) might reduce trading liquidity, raise capital costs to issuers and limit investor participation, particularly for investors who cannot risk locking up their investments for this period.

The SEC own comments above show a desire to prevent a liquid market and create an atmosphere of "Rules that are unduly burdensome could discourage participation in crowdfunding." as stated by the SEC.

These proposed restrictions contradict the SEC process of protecting investors, by preventing trading liquidity, which provides an investor a path to unlocking an investment when needed.

What if the issuer determines it needs a secondary offering at the time the restriction is lifted. The supply and demand theory would kick into gear. All the securities that were in the one year lockup period would now be available for sale and the issuer may not be successful with the secondary offering due to the large supply in the market. This could in effect, drive down the price of the security and prevent the issuer from raising any additional capital.

So why restrict the resale of a crowdfunded offering? Why not have a free market and let the buyers and sellers decide.