October 30, 2020
Thank you for the opportunity to comment on S7-13-20. I am an attorney who regularly represents investors who have been wronged by their financial advisor, securities brokerage firm, or investment advisor.
S7-13-20 would be horrible for the investing public if it is enacted. I have seen numerous investors injured by unlicensed financial advisors selling investments like Woodbridge, 1 Global Capital, and other purported private investments. These investments have devastated investors, and in the instance of Woodbridge and 1 Global Capital, have turned out to be huge fraudulent schemes.
Allowing unlicensed \"finders\" to solicit \"accredited\" investors would open the floodgates to allowing more fraud upon the investing public. This proposal creates financial incentive for advisors and their \"finders\" to push the sales of more private placements, which tend to carry much more risk (often substantially more risk) than publicly-traded investments.
While this only applies to accredited investors, the number of persons who are considered accredited has grown substantially over the last several decades. Many of those who are considered to be \"accredited\" still do not have the wherewithal to adequately ascertain the risks of private placements. Moreover, I have seen many instances were licensed financial advisors have inflated unaccredited investors' financial information to enable them to qualify for these investments, often to the detriment of the investor. I would expect to see a significant increase of advisors using inflated financial information of investors if this proposal is enacted.
These so-called \"finders\", who do not appear to have any regulatory system to answer to, are more likely to bend or break the rules. Now they would be financially incentivized to do so under this proposed rule.
In short, I do not support the passage of this proposed rule.
Sincerely,
David Neuman