October 8, 2020
I am an attorney admitted to practice in NY, CA, WA and OR that regularly represents venture capital backed startups, early stage companies and venture backed investment funds. I grew up in, and currently live near, Silicon Valley. I fully support the proposed Exemptive Order Granting Conditional Exemption from the Broker Registration Requirements of Section 15(a) (the Order). Nevertheless, if the Commission could modify the Order to allow for corporations (e.g., of a particular size or smaller) as well as natural persons to act as finders, I believe the Order would be further improved. It is rare for a natural person acting as a sole proprietorship not to incorporate. The reasons for incorporating have no bearing on the quality of the services to be provided by the Finder. Under the current circumstances of COVID-19, it has become increasingly difficult for small businesses to raise capital. Furthermore, even in a robust economy like the one we enjoyed until March 1st of this year, venture backed and non-venture backed companies trying to raise capital in private offerings faced numerous difficulties, primary of which was reaching accredited investors. Often times the size of these capital raises are small, small being a relative term meaning under $10,000,000, such that brokers ignore these offerings and the needs of small businesses to focus on larger fees to be earned from larger private or public offerings. Finders play an important role in facilitating capital formation for smaller issuers. More often than not, a finder is a former entrepreneur, attorney, or venture capitalist that is able to bring together accredited investors and promising companies seeking capital by virtue of the human network maintained by such finder. By providing limited exemptions to finders as proposed in the current Order, the market for raising funds will become significantly more democratized and considerably more open and transparent. Currently, brokers and some venture capitalists exploit the current regulatory restrictions on finders for their own personal gain, without concern for the needs of the business seeking to raise capital. The restriction serves as a barrier to entry that allows them to focus on lucrative, larger clients, while ignoring the needs of the remainder of the market. As a result, large segments of the market remain unserved. While there is a risk that charlatan finders may take advantage of small businesses or accredited investors by demanding large commissions on funds raised, or promoting questionable investment opportunities to uninformed investors, the magnitude of such risk will not change as a result of this Order. Furthermore, current SEC regulations are sufficiently robust to address any such risks in the market. On the whole, if the Order is adopted, it will be a significant plus to small businesses and investors alike. I would like to thank the Commission for proposing this Order and I reiterate my full support in favor of its passage.