February 3, 2014
I am a Social Investing Advisor. In an October 1998 petition to the United States Court of Appeals, I opposed the elimination of Glass–Steagall, citing evidence that growing financial market malfeasance greatly reduced the safety and soundness of large financial institutions.
On December 22, 2003 (http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf) and February 6, 2006 (http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf) I warned the SEC that statistical models I created using the proprietary Fully Adjusted Return (TM) Methodology signaled the growing possibility of system-wide economic and market failure.
I am writing to comment on proposed rules under the JOBS Act to permit companies to offer and sell securities. These comments follow those in my book on the Jobs Act titled "The JOBS Act: Crowdfunding for Small Businesses and Startups." http://www.amazon.com/gp/product/143024755X/
As the SEC noted, "Certain companies would not be eligible to use the crowdfunding exemption. Ineligible companies include non-U.S. companies, companies that already are SEC reporting companies, certain investment companies, companies that are disqualified under the proposed disqualification rules, companies that have failed to comply with the annual reporting requirements in the proposed rules, and companies that have no specific business plan or have indicated their business plan is to engage in a merger or acquisition with an unidentified company or companies."
I suggest any company found in a Court of Law to have helped cause the 2006-2013 Financial Market Crisis be disqualified. These firms and their affiliates should be prohibited from registering as funding portals or providing services to funding portals. The following firms meet this criteria:
Standard and Poor's
Bank of America
Consider the following:
On April 28, 2003, every major US investment bank, including Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup, Credit Suisse First Boston, Lehman Brothers Holdings, J.P. Morgan Chase, UBS Warburg, and U.S. Bancorp Piper Jaffray, were found to have aided and abetted efforts to defraud investors. The firms were fined a total of $1.4 billion dollars by the SEC, triggering the creation of a Global Research Analyst Settlement Fund.
On September 4, 2003, Goldman Sachs admitted that it had violated anti-fraud laws. Specifically, the firm misused material, nonpublic information that the US Treasury would suspend issuance of the 30-year bond. The firm agreed to "pay over $9.3 million in penalties."
On April 28, 2003, Goldman Sachs was found to have "issued research reports that were not based on principles of fair dealing and good faith .. contained exaggerated or unwarranted claims.. and/or contained opinions for which there were no reasonable bases ". The firm was fined $110 million dollars.
On January 25, 2005, "the Securities and Exchange Commission announced the filing in federal district court of separate settled civil injunctive actions against Morgan Stanley Co. Incorporated (Morgan Stanley) and Goldman, Sachs Co. (Goldman Sachs) relating to the firms' allocations of stock to institutional customers in initial public offerings (IPOs) underwritten by the firms during 1999 and 2000."
According to recent news reports,"One of the nation's largest banks..set up a special sales office to steer risky subprime loans to residents in Prince George's County, Baltimore city and other predominantly black communities..Wells Fargo Bank employees allege in a lawsuit. According to the sworn statements by two former loan officers filed June 1 in U.S. District Court of Maryland as part of a lawsuit being pursued by the City of Baltimore against Wells Fargo alleging discriminatory and predatory lending, bank employees targeted black neighborhoods and churches for the escalating-interest mortgages, which some in the office called 'ghetto loans.' Many customers with sufficient income, credit and savings to qualify for fixed, lower-interest mortgages were still urged to take subprime loans..because the higher rates meant bigger profits for the bank: 'If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, the loan officer would receive a bonus.' "
On December 11, 2008, the SEC finalized settlements with Citigroup Global Markets, Inc. (Citi) and UBS Securities LLC and UBS Financial Services, Inc. (UBS) that will provide nearly $30 billion to tens of thousands of customers.
On July 15, 2010, the Securities and Exchange Commission announced that Goldman, Sachs Co. will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse. In agreeing to the SEC's largest-ever penalty paid by a Wall Street firm, Goldman also acknowledged that its marketing materials for the subprime product contained incomplete information.
On June 21, 2011, the SEC announced that J.P. Morgan Securities LLC will pay $153.6 million to settle SEC charges that it misled investors in a complex mortgage securities transaction just as the housing market was starting to plummet.
The proposed rules also note that:
"In its offering documents, among the things the company would be required to disclose:
1. Information about officers and directors as well as owners of 20 percent or more of the company.
2. A description of the company's business and the use of proceeds from the offering.
3. The price to the public of the securities being offered, the target offering amount, the deadline to reach the target offering amount, and whether the company will accept investments in excess of the target offering amount."
I have developed a pricing model for use in crowdfunding and have also developed unique:
1. Educational tools and materials and
2. Measures to reduce the risk of fraud.
These are described, in part, in a Washington Post article I wrote, online at: http://www.washingtonpost.com/business/capitalbusiness/commentary-the-quest-for-crowdfunding-enters-a-complicated-but-critical-phase/2012/12/23/d15ef280-4939-11e2-ad54-580638ede391_story.html