May 30, 2020
Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets
RE: File Number S7-05-20
Via the Commissions internet comment form (https://www.sec.gov/rules/proposed.shtml)
Definition: Nc – No comments or constructive input
Responses are numerically listed according to Comment Request indication number
Dear Staff,
In my 35 years of witnessing the Exempt Securities marketplace, this is the most substantive initiative Ive witnessed for proactive regulation implementation for the lower tier capital markets.
These proposed regulations bring critical mass to the Online Capital Marketplace for investors of all levels to participate in supporting the Early stage ecosystem and thus meaningful future economic growth.
Per individual numerical responses I present what I believe to be valuable input and perspective that should be considered by the Staff for potential future amendments, including novel concepts introduced in certain responses not previously discussed in the Staffs brief.
Nc reflects responses to which No comment or additional perspective.
I offer the following comments and responses
1. Eliminate the concept of Integration altogether for Issuers that file and keep current called IE. Form FH (Funding History) that would integrate Form D, Form C and links to Offering statements. These filings will inform the Commission and the Public of ALL Offerings conducted both historical and currently active including any Exempt Offerings that are active during a Registered Offering. This would be one place
2. Eliminate the need for the testing.
3. Safe Harbor would exist for those Issuers that keep their Form FH current
4. Nc
5. As proposed
6. Allow for both Rule 506(b) Offerings to accept up to 35 non-accredited Investors with a $25,000 investment cap that can be conducted every 90-day period while the Issuer maintains their Form FH information with each offering.
7. Yes
8. Yes
9. Nc
10. Nc
11. Regulation S should have the same 1-year resale restrictions as Regulation CF with respect to time and prior resale ability to QIBs and IAIs.
12. Nc
13. Nc
14. Nc
15. Nc
16. Yes
17. Final Sale of the securities should be deemed completion
18. YES-Given the ability for a Registered CF Portal to receive success based compensation from Reg CF offerings made to both non and accredited investors, the Reg CF portal should be eligible to conduct Rule 506(c) offerings concurrently and receive success compensation similar to that of a Reg CF Offering from Accredited Investors. The Commission should consider this ability for Regulation A+ Offerings as well. The key difference is a Registered Broker-Dealer can offer Investment advice whereas the Reg CF Portal cannot regardless of Offering type.
19. Nc
20. Eliminate the prohibitions on general solicitation and general advertising and focus on the investor protections surrounding the underlying offering. Merge 506(b) with 506(C) and allow for Solicitation and up to 35 non-Accredited Investors with $25,000 limits every 90 days.
21. Nc
22. Pre-existing substantive relationship is a method for which the Issuer or Intermediary believes the Investor is a reasonable candidate to meet the offering criteria. This could be replaced with a Commission approved Investor questioner that could determine if the Investor is qualified and a reasonable candidate for certain types of Offerings. Regardless of length of a relationship or how the Issuer was introduced, the fact pattern should be established in questioner format if the Issuer can make certain offers to certain candidates.
23. Should help
24. Yes, Issuers should be able to test-the-waters to determine if the offering will merit investor attention and interest prior to incurring costs and filings. Investor protections should be made at the offer level and testing-the-waters materials should be available to investors of all levels.
25. Generic solicitation materials should be filed with the Form C and Form 1-A upon original filing.
26. Yes all solicitation materials should be filed with the Commission. Suggestion is to create a (IE.) Form FH (Funding History) that Issuers should file prior to the completion of any sale of any exemption. This can act as a running Offering history form for Investors to review including the Offering terms and valuation history as well as any concurrent offerings.
27. All material should be filed on Form FH at or prior to the initial sale of any offering.
28. Yes, all Regulation Crowdfunding testing-the-water communications should be directed to the Intermediary platform for more information and to be ready in the systems for the actual campaign launch.
29. Nc
30. Yes
31. Any outside oral communications outside of the funding portal platform channel should always direct the investor to the platform for completion of the Offering and confirmation that all materials and solicitation are consistent with any oral offers made absent of the platform.
32. Yes, the terms of the offering should be fluid and give additional details that would be important to the potential investor including use of proceeds and how the offering is progressing.
33. Yes, the general solicitation should include all information related to all concurrent offerings outstanding at the time of the solicitation. The investor should be made aware as part of a decision on an offering being solicited.
34. Based on the data Issuers and Intermediaries are hesitant to utilize 506 (c) most likely based on the Verification burden.
35. See 39
36. See 39
37. See 39
38. See 39
39. Remove the burden from the Issuer and Intermediary. Allow the Investor to register at the Investor Certification Portal (ICP) and fulfill their financial information and a perform an Investor Module similar to Continuing Education. Once completed it can produce an Investor Certified ID (Investors could be more comfortable sharing personal information with SEC/SIPC then the current mediums and should take no more than 30-45 minutes to perform). The Accredited Investor ID is utilized for all subscriptions and will remove the burden from Issuer/Intermediary. Once a year the Investor must return to the AP portal and reaffirm their Accreditation and receive any Continuing Education the Commission deems valuable. This could also be used for Creating/Monitoring additional classes of Investors IE deemed Sophisticated Investor/Annual Limits with a separate registration testing their knowledge and financial ability for risk as a modified Investor ability for 506C Offerings and higher Reg CF limits. The ID system can also be used to track any annual limitation quota if used for non-Accredited investors as well.
40. Rule 506(b) requirements should be modified to the Reg CF requirements for Reviewed financials. This would allow the Issuer to proceed beyond $107,000 on the Reg CF and utilize the observed financials for the Rule 506(b) offering concurrently.
41. Nc
42. Yes, align with the observed financials requirement of Reg CF
43. Nc
44. Nc
45. Nc
46. Should be exempt if a current Reporting company.
47. Nc
48. Nc
49. Nc
50. Yes
51. Yes
52. Nc
53. Nc
54. Nc
55. $100M
56. Nc
57. Yes Potentially
58. Nc
59. Nc
60. Yes, $10M should be considered to attract larger Issuers/better quality for non-accredited Investors, Yes larger Issuers will adapt Reg CF as a result, No
61. Yes, require Form D to be filed prior like Reg CF.
62. Yes, Same as 506C Certification, Up to 35 Unaccredited with $25,000 limit
63. Yes, Align with Reg A Tier 2
64. Implement current $250k Self Financial filing as permanent rule
65. Preempt all state rules for secondary sales on all exemptions
66. Yes, Yes
67. Should not require RIA to manage the single purpose SPV
68. Yes, implement as proposed
69. Yes, implement as proposed
70. Yes, implement as proposed
71. Implement as proposed
72. Yes, information is same as pass through
73. SPV should automatically vote with Majority to simplify voting process
74. File jointly, simply the review process for potential Investors.
75. File jointly and allow for direct sales off of same Form C
76. Yes, Yes, Nc
77. Should clarify that Platform is acting as the Broker, SPV is not taking Dealer inventory risk
78. Yes, only exclude SAFEs
79. Yes, Issuers should have to set a conversion valuation at time of Offering
80. No, if it is applicable to non reporting companies, should not disqualify those that have made effort to be current in past.
81. Yes
82. Yes, yes
83. Yes, No require with Form C Amendment
84. Nc
85. Nc
86. Yes
87. Allow for multiple simultaneous offering across all exemptions and registered offerings with no integration tests.
88. Nc
89. Nc
90. Nc
91. Economic benefits of eliminating the waiting period all together can result in greater amounts of Capital raised across the spectrum of Issuers as to keep all Offering types available at any time, and thus the greatest Cost benefit.
92. Main benefit would be to allow for Networks to hold 506B Offerings and thus allow for the 35 Non-Accredited participation.
93. Nc
94. Yes, it gauges their decision to fund the expenses of the offering, No
95. Allow for a general TTWs campaign that can gauge both Acc/nonAcc Investors to determine best Exemption to proceed under.
96. Nc
97. Issuers with less funds can determine if they should invest in an Offering
98. This will create more Risk or Fraud as to allow for unmonitored Communication for Offers and Solicitations from unsophisticated Issuers.
99. Reduce costs, see Response 39
100. Reduce costs, see Response 39
101. Implement Response 39, merge 506 B and 506 C and develop a Sophisticated Investor Class for the 35 Investors every 90 days at a $25k limit in Reg D 506 C
102. Nc
103. Allow for 35 non-accredited investors at a $25k limit for every 2.5M raised for all exemptions
104. Nc
105. Yes, links to financial filings can provide investor access.
106. Less legal and accounting fees.
107. Larger limits can attract larger/higher quality Issuers and more developed opportunities for Intermediaries to present to Investors.
108. Yes, and allowing to Switch will allow for greater Capital formation.
109. $100M, $7.5M $15M, review and adjust to market conditions every 2 years.
110. Increase to $25M, allows for larger Issuer participation.
111. Yes, combine Reg CF into the first Tier of Reg A (Tier CF $7.5M,/Tier I $25M/Tier II $75M) and combine into a single Rule 506 (unlimited) to allow for Solicitation and up to 35 non accredited $25k investors every 90 days. ($25k represents a fair and reasonable limit as an amount of exposure for early stage speculation).
112. Benefits would be potential for a greater number of Issuers to utilize the exemption, cost of utilizing CPA remains the same at the new thresholds as requirements would be unchanged.
113. Benefits would be a potential for a greater number of small Issuers utilizing the exemption, costs would decrease for these potential Issuers which is a benefit as well.
114. Benefits would be a larger amount of Capital formation from the non accredited investor pool, Yes it would benefit accredited investors and issuers from having to concurrently run a 506C to suffice accredited investor requested investment amounts, Yes, Yes, Nc
115. Benefits would be greater amounts of Capital formation for early stage Issuers, Allowing for up to 35 non accredited Investors to invest $25k every 90 days, benefits would be greater Capital formation for Issuers.
116. Costs are additional cost of set up and administration of the SPV, Benefits are potential for greater number of Issuers that will participate in the exemption with this capability.
117. Benefits would be increased use of the exemption cost are increased legal set up expense.
118. Benefits would be less confusing to Investors and force Issuers to address current valuations.
119. Nc
120. Nc
121. Nc
122. Nc
123. Nc
V Nc
VI Nc
VII Nc