Subject: File No. S7-09-13
From: Sherouk Omara

November 14, 2013

(1, p. 66432) Should we propose that the $1 million limit be net of fees charged by the intermediary to host the offering on the intermediary’s platform? Why or why not?

The $1 million limit should not include the fees charged by the intermediary to host the offering on its platform. I believe that this would not be beneficial to the startup or small business seeking funding. Seeing as Title III is designed to make it easier for new businesses to raise capital, including external fees in the limit is not ideal. Additionally, a Kaufmann Foundation study found that raising $1 million through crowdfunding would cost a startup about 10% of what they raise. Going for less, like $100,000, would cost around 30%. That being said, if anything, the limit should be increased to help offset costs.

(2, p. 66433) We request comment below on whether to calculate the investment limit based on the lesser of annual income or net worth.

The investment limit should be calculated based on net worth because it is higher than annual income. Additionally, I agree that an investor’s joint net worth with his or her spouse should be considered. If the commission decides that it will calculate the investment limit based on annual income, then the current rules for the accreditation of an investor should apply for the time being. Once the regulation is passed and investors begin to use crowdfunding to invest, the criteria for accrediting an investor are likely to change.

(4, p. 66436) Should we define the term ‘‘platform’’ in a way that limits crowdfunding in reliance on Section 4(a)(6) to transactions conducted through an Internet Web site or other similar electronic medium? Why or why not?

(5, p. 66436) Should we permit crowdfunding transactions made in reliance on Section 4(a)(6) to be conducted through means other than an intermediary’s electronic platform? If so, what other means should we permit? For example, should we permit community-based funding in reliance on Section 4(a)(6) to occur other than on an electronic platform? To foster the creation and development of a crowd, to what extent would such other means need to provide members of the crowd with the ability to observe and comment (e.g., through discussion boards or similar functionalities) on the issuer, its business or state.

A “platform” should not be limited to an electronic one available on the Internet. This is because the crowdfunding platform is relatively new, and the traditional method of seeking capital (where startups pitch to potential investors in person) still applies. If one wishes to invest through other means, he or she should be allowed to do so. I do realize, of course, that electronic investments are commonplace in the United States. If crowdfunding is to be extended to investors outside the country (as is mention elsewhere in the proposal), it is better to be more open to other means.
Concerning community-based funding mentioned in the following question on page 66436, if such a mean for investment were allowed, then community members could act as the intermediaries. I recommend that a website could be setup whereby a small business or startup can solicit investments and comments from the community as an alternative to current crowdfunding platforms.