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During Crowdsourcing.org's most recent Crowdfunding Live Chat this past Monday, June 4, leaders from CfIRA, CfPA and others in the emerging equity crowdfunding industry gathered to discuss recent discussions with SEC and FINRA on how the industry will take shape. There was also a recap of the recent Crowdfunding Made Simple event in Salt Lake City and talk of similar events in the works for several other states.
The entire June 4 transcript is below. Live chats are generally held each Monday at noon, eastern time. You can also read the transcript of the previous live chat here.
CFIRA CHAT: FOLLOW-UP ON THE CROWDFUNDING MADE SIMPLE CONFERENCE
Jason Best, Start-Up Exemption
Sherwood Neiss, Start-Up Exemption
Freeman White, Launcht
DJ Paul, CrowdFunder
Vince Molinari, GATE Technologies
Candace Klein, SoMoLend
Vincent Molinari:sorry for my delay
Peggy Quinlivan:good morning
Crowdsourcing_:Hi, this is Carl
Crowdsourcing_:Hi, this is Carl
Crowdsourcing_:Hi, welcome to todays Live Chat - we have a few updates to share
Crowdsourcing_:When you join the chat please announce yourself and your role and interest
Crowdsourcing_:Today we are going to cover four topics
Vincent Molinari:Hi Carl Hi everyone Vince Molinari Gate Tech
Crowdsourcing_:A letter that is being sent to the SEC regarding Safe Harbor for portals on the topic of investment advice
Crowdsourcing_:We are also going to talk about last weeks successful event – Crowdfunding Made Simple held in Salt Lake City, UT
Crowdsourcing_:Also, There is a meeting coming up with FINRA
joyschoffler:Hello, Joy Schoffler with Leverage PR
Peggy Quinlivan:Hi - I'm Peggy Quinlivan, I'm very interested after attending the SLC conference
DJ PAUL:DJ Paul here.
Alejandro Cremades:Hi Everyone. Alejandro Cremades, Founder & CEO of Rock The Post
Candace Klein:Hello everyone. This is Candace from SoMoLend and CFIRA
Berkeley Geddes:Great to be on this Chat....
Crowdsourcing_:Hi DJ, Hi Candace
Crowdsourcing_:I mentioned two of todays topics
Berkeley Geddes:Hello all.. this is Berkeley Geddes, one of the CFMS organizers...
Crowdsourcing_:the two other topics we want to cover are (1) a meeting with FINRA and (2) a symposium in DC
Alejandro Cremades:Hello Everyone. Alejandro Cremades, from Rock The Post
Berkeley Geddes:Welcom Peggy!!! So what did you think of the conference?
Candace Klein:A big thank you to everyone who attended the Crowdfunding Made Simple conference in Salt Lake City last week, and welcome to the CFIRA team!
DJ PAUL:Can I take the meeting with Finra?
Crowdsourcing_:Let's start with the letter on Investment Advice going to the SEC - Canance, can you take this?
Crowdsourcing_:DJ - let's lead then with the FINRA meeting - what can you tell us about it?
roii patterson (iii):Hi all, roii here from LinkedIn Crowdsourcing & Crowdfunding group
Candace Klein:Today, CFIRA will issue Public comments on SEC Regulatory Initiative under the JOBS Act pertaining to Investment Advice
Tara McCarthy:Hi all! Tara McCarthy-Bell with Gigya Inc.
Berkeley Geddes:Hello everyone... this is Berkeley from CfPA and one of the CFMS conference organizers....
Berkeley Geddes:Peggy, great to have you on the chat... what did you think of the conference?
Matthew Ledingham:Matt Ledingham from SLC, hello all
Candace Klein:We have been asked by the SEC to provide guidance on what Safe Habors should be provided to portals to avoid investment adviser regulation
Crowdsourcing_:Hi Berkeley, glad you could join
roii patterson (iii):Hi All, roii here from LinkedIn Crowdsourcing group
Candace Klein:Specifically, we want the opportunity, as portals, to be able to offer investment education to investors on deals without the fear of regula
Crowdsourcing_:@Candace - great that the SEC is asking for input
George S. Georgiades:Hello, this is George from Ellenoff Grossman & Schole.
Rich Wharton:Rich Wharton w/ R Four. Sorry for being late.
Candace Klein:We will post our formal comments at www.cfira.org later this week, and welcome your questions and additions to this discussion
Candace Klein:In addition, DJ Paul is leading a meeting with FINRA later this week, and I'd like to ask him to provide an overview of the CFIRA agenda
DJ PAUL:So, the meeting with FINRA will be either this week or next. A bit of B/G: While we all had thought perhaps the NFA might be another
George S. Georgiades:this is George from Ellenoff Grossman & Schole - pleased to be joining you today.
DJ PAUL:option as an SRO
DJ PAUL:but its becoming increasingly clear that FINRA is going to almos certainly be the SRO
Crowdsourcing_:interesting DJ - what's the basis for this view
DJ PAUL:This is not the first meeting with FINRA, it will be the first during which everyone pretty much knows that FINRA will be it.
Candace Klein:Agenda items for this meeting include: Portal registration and requirements
Crowdsourcing_:@DJ - are we hearing this directly from the SEC and FINRA?
DJ PAUL:The reason are a touch nuanced, but in short, its not clear that NFA has the desire to become even more under the supervision of the SEC
Candace Klein:Agenda item 2: Portal mechanics
DJ PAUL:additionally (and while there is not 100% consent on this) the SEC has indicated several times that FINRA really is the best, if not the onl
Candace Klein:Agenda item 3: Portal investor protection
DJ PAUL:only option
DJ PAUL:only option.
Candace Klein:Agenda item 4: D. Supplemental suggestions and considerations
DJ PAUL:Candace is listing the FINRA meeting agenda options now. If anyone has comments or other suggestions, now would be the time to mention them.
Rich Wharton:Really quickly ...I think right now the FINRA is the only registered 'advisory' group with the SEC. Others should be able to apply.
Candace Klein:If there are other items that this group would like to see on the agenda or discussed in our meeting with FINRA, please email me or DJ
Candace Klein:Candace@somolend.com or firstname.lastname@example.org
DJ PAUL:Rich, that's true. However, become an SEC approved SRO is a long, costly and arduous task.
Crowdsourcing_:@Candace - what do you mean re Portal Mechanics
Rich Wharton:Got it.
DJ PAUL:It can be done, but there is a reason why it hasn't happened in 70+ years, if you catch my meaning.
Candace Klein:Next, CFIRA is hosting a symposium in Washington DC with representatives from the White House, House, Senate, SEC and FlNRA on July 13 or 14
Rich Wharton:Got it.
Berkeley Geddes:It sounds like the agenda is focused around portal regustration requirements... will the entrepreneur ask posted on a portal be passed to
DJ PAUL:In the future, as the crowdfunding space becomes a mature market, there may be an opportunity to set up our own SRO. But not now.
Crowdsourcing_:@DJ - do we feel that FINRA is open to input - it seems the SEC has been
Berkeley Geddes:FINRA as well? Will there be any entrepreneur SRO reporting requirements?
Candace Klein:The purpose of this symposium will be to bring all affected bodies into the same discussion to discuss the various issues we've been coverin
Berkeley Geddes:Should this be on the agenda as well?
DJ PAUL:Yes, it seem that FINRA is very open to input. That's the sense. But we will see.
Candace Klein:g during these live chats. You are the first to know about this event, and more details will follow.
DJ PAUL:Berkeley, we are going to suggest to both the SEC and FINRA what we think reporting requirement should be.
Candace Klein:If you would like to get engaged in the CFIRA discussions with the SEC, FINRA and others, or if you'd like to get engaged, please sign up at
Crowdsourcing_:@DJ - Candace mentioned a few agenda items - is Portal Mechanics about reporting requirements?
DJ PAUL:Portal mechanics is certainly on the list, yes.
Crowdsourcing_:let's keep on the topic of the FINRA meeting for now - let's understand the agenda items
Crowdsourcing_:What does this topic address?
Berkeley Geddes:conside Portal requirements being different accross - Donation, Reward, Equity, Lending...
Crowdsourcing_:@DJ or @ Candace - can you please explain what's included under the topic of Portal Mechanics
DJ PAUL:Portal mechanics: Establish issuer parameters (no investment “qualifiers”) Intermediary services Due diligence
DJ PAUL:continued: Background checks Standard documents (business plan format, investor questionnaire, subscription agreement) Fees, in
Crowdsourcing_:okay, thanks - what's the view regaring the Portals obligations vVs. the issuers responsibilities
DJ PAUL:Fees, including fees for third party services, Advertising
Candace Klein:Under the portal registration requirements agenda item, we will cover the following: Registration of portal with FINRA (Limited examination
DJ PAUL:Portals obligations Vs. the issuers responsibilities, we are still trying to work out who is responsible for which. Its ongoing.
Candace Klein:related to investor protection and compliance aspects of portal), Insurance, Recordkeeping, Investor records, Issuer/funding records, Multip
Candace Klein:Multiple websites under a single portal, Bad actor exclusions, Financial responsibility, Portal
Candace Klein:Issuer funds, FINRA examinations / oversight, Dispute resolution
Crowdsourcing_:@Candace - this is a big topic - clearly one of the things everyone is keen to understand is the costs of CF
Crowdsourcing_:understanding the Portal Mechanics will go some way to understanding the costs
Candace Klein:Under the portal investor protection agenda item, we will cover the following: Investor qualification - investor income and investing histo
Candace Klein:history, Escrow for investor funds, Educational materials, Disclosure requirements (issues related to responsibility for various disclosure
Crowdsourcing_:@Candace - what's the current thinking re whether the portals will need to consolidate investor information
Crowdsourcing_:or whether it will be self reported by investors
Candace Klein:@Carl, CFIRA continues to advocate for portals to be able to rely upon representations and warranties,
Candace Klein:however, the SEC has given strong guidance that a national database will likely be required.
DJ PAUL:Hey, guys, I'm sorry, but I have to hop off now. But you can reach me at dj@crowdfunder if you have any additional comments or questions.
Candace Klein:As such, we are now working to create a 'minimal reporting' checklist as a plan B, and can discuss this in more detail at a future live chat
Candace Klein:to get input from the full group
Crowdsourcing_:@Candace / @DJ - so how would this database be set up and who would run it
Candace Klein:I have to leave now for a meeting, but welcome comments and suggestions on our existing agenda
Crowdsourcing_:Let's jump to another topic - @ Berkelely - can you giveus an update on last weeks CFMadeSimple event
Berkeley Geddes:CFMS was a two day deep dive event into crowdfunding...
Crowdsourcing_:I attended myself - it was well attended ~150-~200 participants
Berkeley Geddes:the conference attracted over 250 participants and 29 presenters / panel discussion presenters...
Crowdsourcing_:The audience was interesting - for the first time I met many entrepreneurs keen to understand how to use CF
Berkeley Geddes:Approx 60% of the attendees were entrepreneurs... they were a very energetic group.. each session could have gone another hour with Q/A.
Crowdsourcing_:it seems that CF is now gaining interest at a local level by many small businesses wanting to use CF'ing
Rich Wharton:So overall questions from potential issuers?
Berkeley Geddes:We had over 50 people sign-up for the conference after the first day... many left the conference and contacted associates
Crowdsourcing_:yes - there were many questions - how to select a portal, how to approach a project, etc.
Berkeley Geddes:Continued: encouraging them to attend the conference.. they saw CF as critical to funding E's
Crowdsourcing_:it was interesting how many questions there were regarding the confusion driven by the lack of knowledge about portals
Crowdsourcing_:it was clear people were overwhelmed by the choices - people wanted to know how you selected a strong portal
Rich Wharton:What were some of the differentiators in choosing a portal?
Berkeley Geddes:Yes, the lightbulbs started to go off in many participants minds regarding CF... it was exciting to see the level of interest...
Berkeley Geddes:Regarding the conference, do participants on this chat have any questions?
Crowdsourcing_:what should be the basis for selection? What support one should expect from the portals? What are the risks etc.
Crowdsourcing_:when's the next event planned?
Berkeley Geddes:Portal selection criteria... business model of the portal, asks funded, nature of the their investment communitiy, portal support for asks..
Crowdsourcing_:Can anyone on the chat inform us about the July Symposium in DC - Berkeley, do you know about this?
Crowdsourcing_:I understand there is going to be a meeting on 13th and 14th July to gather the various regulators together with CfPA
Berkeley Geddes:Portal selection, be sure to understand the focus and intent of the portal, what Entrepreneur need are they trying to solve...
Crowdsourcing_:and CfIRA members
Berkeley Geddes:We are in the process of scheduling CFMS conferences in many states... stay tuned...
Berkeley Geddes:Regarding the DC conference, I do not have the details on this conference.
Crowdsourcing_:So, let's bring today's chat to a close - if you have questions of agenda topics for future discussions
Crowdsourcing_:pleas email me email@example.com
Berkeley Geddes:My wifi connect is spotty... apologies...
Crowdsourcing_:thanks for joining for todays' update
Cole Lewallen:Thanks Carl
Crowdsourcing_:have a great week all - there is plenty to do as always!
Berkeley Geddes:Thanks for putting this chat together...
Berkeley Geddes:We need to continue to get the word out regarding crowdfunding..
Berkeley Geddes:Thanks everyone!!!
Cole Lewallen:Thanks for putting the chat together