Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-settings.php on line 229

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-settings.php on line 231

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-settings.php on line 232

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-settings.php on line 249

Strict Standards: Redefining already defined constructor for class wpdb in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/wp-db.php on line 52

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/cache.php on line 36

Strict Standards: Redefining already defined constructor for class WP_Object_Cache in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/cache.php on line 389

Strict Standards: Declaration of Walker_Page::start_lvl() should be compatible with Walker::start_lvl($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 537

Strict Standards: Declaration of Walker_Page::end_lvl() should be compatible with Walker::end_lvl($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 537

Strict Standards: Declaration of Walker_Page::start_el() should be compatible with Walker::start_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 537

Strict Standards: Declaration of Walker_Page::end_el() should be compatible with Walker::end_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 537

Strict Standards: Declaration of Walker_PageDropdown::start_el() should be compatible with Walker::start_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 556

Strict Standards: Declaration of Walker_Category::start_lvl() should be compatible with Walker::start_lvl($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 653

Strict Standards: Declaration of Walker_Category::end_lvl() should be compatible with Walker::end_lvl($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 653

Strict Standards: Declaration of Walker_Category::start_el() should be compatible with Walker::start_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 653

Strict Standards: Declaration of Walker_Category::end_el() should be compatible with Walker::end_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 653

Strict Standards: Declaration of Walker_CategoryDropdown::start_el() should be compatible with Walker::start_el($output) in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/classes.php on line 678

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/query.php on line 21

Deprecated: Assigning the return value of new by reference is deprecated in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/theme.php on line 508

An Open Question - Impacting the Future Professional Service Providers to Equity-Based CrowdFunders

September 15th, 2012

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

An Open Question Directed to Anyone- Especially to future Professional Service Providers to Equity-Based CrowdFunders

I do not wish to throw a big wet blanket over everything especially in all the afterglow of the passing of the crowdfunding Bill, however, let me present a fundamental question for everyone. It has to do with the FINRA broker/dealer full-registration and licensing requirements. Do they come into play for those wishing to offer their expertise or advice (i.e. professional services) in an effort to further the transparency and successful outcome of a crowdfunding campaign (barring general solicitation)? Furthermore, would it also impact any ancillary services that a “registered” crowdfunding portal provider may want to offer? The NASAA letter brings up the matter under paragraph 2 under “Regulation of Platforms” in its letter to the SEC below:


It seems that NASAA’s position on the matter is that there is a “so-called intrusion” on the traditional FINRA broker/dealer community. Therefore the SEC should limit the activities of these people having these skill sets and prohibiting them from offering them in the furtherance of a crowdfunding campaign. This effectively confines the offering of these services to “registered” portal providers and “fully” registered FINRA register Broker/Dealers.

WHAT ARE BROKER-DEALERS AND FUNDING PORTALS? Each are types of businesses which Congress has required be strictly regulated and supervised by the U.S. Securities and Exchange Commission. They are also required to be licensed and supervised by the Financial Industry Regulatory Authority or FINRA (formerly the NASD). Broker-Dealers are permitted to offer financial advice. Funding Portals are NOT permitted to offer financial advice. No Funding Portal will be licensed for operation until January 2013, at the earliest.

What does everyone think? Does this seem capricious and arbitrary to unregistered service providers? Furthermore, does it boil down to a form of territorial protectionism of the traditional FINRA broker/dealer community which has the effect of encroaching on the crowdfunding regulatory space? The fact of the is matter is there are many professionals out there who are perfectly capable of rendering these services in a competent and reliable fashion, furthermore, why limit these skill sets to only crowdfunding portals or fully registered broker/dealers? Keep in mind, I am not talking about the money match making function which a typical crowdfunding platform provides. The scope of the services I am suggesting include such activities as due diligence investigations, business valuations, advice on deal structure, the drafting of offering memorandums, and social media campaign development (no direct solicitation of investors). Many of these services typically fall under the genre of small business corporate finance so why should they be the private domain of FINRA registered entities and have to be regulated?

Good public policy dictates we need more stakeholders to build this industry not fewer. Limiting these activities to only FINRA registered brokers kills the true spirit of the Crowdfuning Bill. Allow the market place play its role in this area and do not over regulate this function.
Why should these activities trigger any of the broker/dealer registration provisions under the 1934 Securities and Exchange Act?…thereby constituting “effecting securities transactions without being registered”? Furthermore, why should these activities be the exclusive domain of “registered” portals and “fully registered broker/dealers”? It simply doesn’t make sense in my opinion. If a crowdfunding service provider should have to become registered; it would indeed impose an undue cost burden on small advisors wishing to offer out their services to deserving community-based projects and economic development projects. A full broker/dealer registration requires an extensive series of test taking that has no relevance to what these professionals typically must do plus it imposes a costly and lengthy registration process with FINRA thus indirectly making these services it no longer feasible to small businesses.

SEC Past Positions on the Matter:

The SEC provides its administrative guidance on these matters and others under what is known as stare decisis case law (doctrine of precedent) and/or through various administrative actions and no-action letters (albeit they sometimes rather vague). In doing so, it lays out the parameters for legal counsel wishing to advise their client(s) on when to become registered when not to…stipulating when they may be engaging in “effectuating” securities transactions - thereby requiring them to be registered as a FINRA broker/dealer. As you will note below (after reading the NASAA study) there really seems to be no particular clear bright line according to the North American Securities Administrator Association (NASAA). NASSA is a trade group of state security regulators.


What is your take on the matter? What about the case of Profounder in California, which was shuttered and cited for being an unregistered Broker/Dealer while performing crowdfunding activities? What will happen in the future as it relates to “effectuating securities transactions” in the crowdfunding arena? If any of these mandates still hold, wouldn’t that impose an undue burden on all of us? This seems to go against one of the chief provisions of the JOBs Bill which includes as its primary mandate to make these services affordable and attainable to small businesses. The problem is that most service providers find this licensing and qualification process irrelevant to what they do. The process requires a service provider to go through the same licensing and vetting process as Goldman Sachs (would have to do), if they were to become re-licensed by the FINRA. Many service providers in the past have avoided broker-dealer registration, arguing that the examinations they face have little to do with the way their business is run. They argue that the regulatory structure makes little sense for the true nature of their business. They complain that the process for getting registered is slow and arcane. Others complain that the current regulatory framework and financial architecture is lacking and onerous, that it should be “right sized” to assist small business and economic development entities to help them in their challenge to access external equity funding.



Investor Transparency & Disclosure:

For those who might have a built-in bias or be in some opposition to providing extra services (thus furthering cause of investor transparency) in an effort to prevent fraud in the crowdfuning industry they might want to view this brilliant research paper by Professor Howard Black on information asymmetry in securities transactions. Investor confidence has been the carbon in the steel of the U.S. securities markets (along with reputational intermediaries) attributing to so much to its’ past successes and stability.


Private Placement and M&A Broker-Dealer Breakout Group

May 31st, 2009

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

The following e-mail from Jerry LaPorte, Chief of the SEC Office of Small Business Policy, confirms that Final Report of the 2008 Forum was published and distributed within the SEC as well as to appropriate committees of Congress.

The Final Report includes the recommendations regarding PPB and MAB which are excerpted below:  In his Opening Remarks to the 2007 forum, Chairman Cox acknowledged the critical importance of small business to the U.S. economy:

- ”Small firms represent…99.7% of all the employer firms in the United States. They employ half of the entire labor force in the private sector.”

-”Of all the net new jobs created in our country, small business generated between 60% and 80% percent in every year during the last decade.”

-”Small business makes up 97 percent of all identified exporters. It produces over 28% of the nation’s entire export value. Small business employs over 40 % of all the high-tech workers in the United States.”

In this light, we urge the Commission to implement on No. 1, and, without further delay, to take the three specific actions in recommendations nos. 2 thru 4:

1. U.S. small business owners are poised to transfer an estimated $10 trillion worth of business assets in preparation for their retirements. To facilitate these transfers and to assist small business owners in continuing their leading role in job creation, exports, and technology innovation, we implore the commission to implement the recommendations of its own Advisory Committee on Smaller Public Companies and Recommendations of the Task Force on Private Placement Broker-Dealers dated June 20, 2005

2. Allow “private placement brokers” to raise capital through private placements issuers’ securities with one or more “accredited investors” in amount per issuer of up 10% of the investor’s net worth (excluding his or her primary residence), with full written disclosure of the broker’s compensation, and in aggregate amounts of up to $20 million per issuer, periodically adjusted for inflation.

3. Provide an exemption from the definition of “broker” and “dealer” for “finders” recommend to FINRA the adoption of a rule to permit broker-dealer fee-sharing with finder, and coordinate the implementation of these actions with the states.

4. Take the lead in adopting rules, in coordination with the states, to create a limited federal registration exemption and simplified system of state registration and regulation for merger-and-acquisitions and business brokers who act as intermediaries and advisors in the purchase and sale of existing business, and adopt a “small business sale” exemption from federal broker-dealer registration by codifying the SEC staff’s no-action letter Country Business, Inc. (Nov. 8, 2006).

The PPBD & M&AB Issue

March 3rd, 2009

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

Dear Shane Hansen, Mike Ertel and other Concerned Citizens:

I have followed this issue for over five years and actually sat on the original committee that made recommendation to the SEC on the PPBD (and later the M&AB) issue. This recent incarnation from the NASD/FINCA bears no resemblance the original recommendations that were made to the SEC in the September 2003 break-out session.

We are in an age now where all of our traditional financial institutions are in meltdown. If we continue to make “buggy whips” and start building upon an outdated regulatory architecture this huge perpetual motion machine also known as our economy (upon which our lively hoods depend) will come to a complete stand still.
I know all of us are anxious to get something passed, but it seems to me, we have been ambushed into to a one-size-fits-all outdated regulatory architecture. The over arching goal here is to lower the cost of financial services for both categories (PPBD and M&AB).  We need affordable Service providers in our industries. That may also mean that we may need our own self regulatory organization. Doing it this way and going along with the NASD/FINCA way proposal is not going to get us to the place we need to be. The exception I would pose of course, is utilizing the already in place FINCA CRD system for disciplinary and background screening of these new intermediaries.

I encourage everyone sound off. We can’t be forced to accept the NASD/FINCA version of the PPBD and M&ABD. It’s top down, and top down is what got this country into the mess that we are currently in. I am soundly opposed any “knee jerk” rule changes” proposed by an existing “self-regulatory organization.”  I have not seen NASD/FINCA make any deliberate contribution to our cause. To put it simply this is only “special interest” serving to preserve itself.

Please indicate by return e-mail if you do not wish to be on my contact list and recieve any further research on these matters. I will place this posting on my blog below ( and invite further comment from all you regarding this matter, come visit often there is a lot we can do together.

John K. Romano
International Open Finance Association Inc.

For Distribution to AM&AA Licensure Initiative Supporters & Friends:

January 15th, 2009

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

Despite the regulatory debacles on Wall Street, the private placement broker (“PPB”) and M&A broker (“M&AB”) proposals continue to advance within the SEC’s Division of Trading and Markets, which is the Division with responsibility for policy and rulemaking with respect to broker-dealer regulation.  This is an update since September 2008 on the status of the PPB, M&AB, and Small Business Sale Exemption rulemaking proposals that are before the staff of the Securities and Exchange Commission (”SEC”) and representatives of the North American Securities Administrators Association (”NASAA”).  There have been several encouraging developments since the September report.

SEC Developments

The 2008 SEC Forum on Small Business Capital Formation was held at the SEC’s Headquarters on November 20, 2008.  This year’s Forum featured a panel presentation and discussion of the PPB and M&AB proposals, which the SEC staff organized and coordinated.  The program was held in the SEC’s main auditorium, from which the panel presentations were webcast by the SEC.  An archive of the webcast can be viewed at:

The prominent role of this year’s PPB and M&AB panel at the Forum is noteworthy by virtue of its heightened visibility, both to the public and to the SEC Commissioners, and the SEC’s allocation of time and resources to host it.  In each of the last several years, the PPB and M&AB proposals have been the subject of breakout discussion sessions, which were attended by SEC staff in a passive, information gathering role.  At this year’s Forum, the SEC staff took an active role by putting the PPB and M&AB proposals on the Forum’s afternoon agenda and organizing the panel, in addition to hosting a breakout session for discussion of the proposals.  A representative of the SEC staff and a representative of NASAA were active participants on the panel, summarizing their regulatory views and providing useful feedback on various aspects of the proposals.  The Forum’s discussion of the proposals demonstrates that they are a staff priority within the Division of Trading Markets.

We anticipate that the PPB, M&AB, and Small Business Sale Exemption (based on the Country Business no-action letter) proposals will again be among the Forum’s final written report of recommendations, as they were in 2006 and 2007.  The Forum’s report is published and provided to the SEC Commissioners and staff, as well as members of Congress.  As in prior years, when completed the 2008 Forum’s report will be posted to the SEC’s website at:

The Forum panel was comprised of Kristina Fausti, an SEC staff member actively involved in the proposals, Denise Crawford, the Texas Securities Commissioner and president-elect of NASAA, Faith Colish, Mike Ribet, Dennis Roberts, and Shane Hansen.  The panel’s biographies can be read at:

During the panel presentation, Ms. Fausti described the progress that has been made by the SEC staff and she said they are currently vetting the PPB proposal with representatives of NASAA.  She observed that the PPB and M&AB proposals are viewed as being closely related and the M&AB proposal will closely follow the PPB proposal.  The PPB and M&AB proposals are premised on similar regulatory concepts of a federal exemption coupled with simplified state-level regulation.  Coordination by the SEC with NASAA is critical to achieving a uniform approach among the states.  Guided by their discussions with NASAA, Ms. Fausti indicated that the SEC staff will be prepared to make recommendations to the SEC Commissioners.  Indeed, the day after the Forum, the director of the SEC’s Division of Trading and Markets, Erik Sirri, indicated that the Division’s staff would be ready to make their recommendations to the Commission, speaking at a November meeting of the American Bar Association’s Committee on Federal Securities Regulation.

At the Commission level, the three previously vacant seats on the Commission have all been filled and President-elect Obama has announced that he will nominate Mary Schapiro to succeed Chairman Christopher Cox to lead the Commission.  Given Ms. Schapiro’s current role as FINRA’s chief executive officer and past service as an SEC Commissioner, she is familiar with these and the many other regulatory issues facing the SEC.  We anticipate little delay to be caused by the transition of the SEC’s leadership to Ms. Schapiro.  Having been senior executives with FINRA, both Ms. Schapiro and Commissioner Elise Walter have an understanding of the roles played by PPBs and M&ABs in working with small businesses, as well as the impact on FINRA if, as required by current law, every intermediary and capital-raising finder were to become FINRA members.  Therefore, we believe these changes in the Commission’s leadership and composition will be helpful in the advancement of these proposals.

Ms. Schapiro’s nomination and confirmation as SEC chair in late January 2009 should coincide with the staff’s initial feedback from NASAA representatives.  In the same time frame, we anticipate communicating directly with SEC Commissioners and their staff to further heighten the visibility of these proposals and individual meetings may be arranged to underscore their importance to small business owners and our economy.  Understandably, the timing of the Commission’s consideration and decision to publish and seek public comment on the proposals will be affected by significant economic and political events that will affect the SEC’s priorities.  We do believe the rulemaking process can and will advance even while Congress begins the anticipated debate about the future form of federal securities regulation.

NASAA Developments

As summarized above, we understand that representatives of NASAA are in dialog with the SEC staff about coordinating a uniform state approach to these rulemaking proposals, focusing initially on the PPB proposal, because it was first proposal to reach the regulators’ desks, and then the M&AB proposal, which is based on a similar regulatory framework.  We are anticipating fruits from those regulatory discussions early in 2009 because NASAA’s leadership has been supportive of these proposals.

Reflecting the importance of these issues to the states, Tanya Solov, the Illinois Securities Commissioner, will be the keynote speaker on Wednesday, January 21, 2009, at the AM&AA’s Winter Conference in Orlando, Florida.  Ms. Solov continues to chair NASAA’s Board-level Finders Project Group.  Other members include Ms. Crawford, noted above, William Donahue (MA), and Henry Tanji (HI).

In December, NASAA hosted a national Regulatory Reform Roundtable emphasizing the important role of state securities regulators in protecting investors.  In connection with the event, NASAA articulated guiding principles for regulatory reforms.  We believe NASAA’s proactive involvement in regulatory reform efforts will further reinforce state-level support for the PPB and M&AB proposals because of the primary role to be played by the states under these proposals.  An audio archive of the Roundtable’s discussion and NASAA’s guiding principles are available at:

Next Steps

With indications from the SEC staff that they are ready to make recommendations to the Commission, to be guided in part by their current dialog with NASAA, in the coming weeks we anticipate the following next steps:

1.Communicating directly to the SEC Commissioners and their legal staffs about the PPB, M&AB, and Small Business Sale Exemption proposals.  Our communications will highlight the broad support of these proposals from the national and regional professional associations. 

2.Develop and provide the SEC with testimonials from small business sellers and buyers about the need for regulatory reform.  These testimonials will help to express the realities that have faced small business owners who needed competent professional assistance with the sale of their businesses.

3.Continue working at the SEC staff level to address specific aspects of the proposals.  At the SEC Forum the staff identified a couple ancillary issues about which they would welcome further information and analysis.  We will be responding to that invitation in the coming weeks.  As part of that response, we will:

Prepare a “white paper” addressing the SEC staff’s concern that the M&AB proposal have a size cap.  If a size cap is to be included in the proposal published for comment by the SEC, our recommendation would likely be in the $75 million to $100 million range.  We will first look to existing dollar thresholds used by the SEC in other contexts that have already addressed the interests of small business owners.  With respect to the Small Business Sale Exemption, we will also be addressing possible thresholds that complement the Country Business no-action letter’s use of the Small Business Administration’s size criteria.

More precisely define the M&A middle market with statistical information about transaction size, volume, and other transaction characteristics.  All SEC rulemaking requires the staff to conduct an extensive analysis of this kind of information in order for the Commission to assess the impact of any proposed rules on small businesses.  By gathering and providing this statistical information to the staff, we hope to guide their analysis and resulting conclusions.

Warner Norcross & Judd LLP
Hugh Makens and Shane Hansen

Post Here to Request a Down-loaded Copy of the Research Paper on Capital Finders

September 24th, 2007

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

All of those who are interested in the research paper at the forum can request it here, besure to include your e-mail it will be protected because these posts are moderated. 

To the 2008′ Attendees of the SEC Government-Business Forum on Small Business Capital Formation

September 22nd, 2007

Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home4/loyola23/public_html/privateplacementbroker1/wp-includes/formatting.php on line 74

Why Not Join Together? ‘

Is the Broker-Dealer finder issue an important issue that is near and dear to you? Now you can do something about it.

Now you can help the SEC to create a proportionate regulatory regime that is tailored to the specific requirements of Small and Medium sized businesses (SMEs)? It is time to develop educational stardards for a Broker-Dealer finder category.

Make your voice heard on each or all of the following points and post here now:

  1. Developing educational standards for the Private Placement Broker-Dealer
  2. Support refined regulations governing micro-caps
  3. Set standards “GASBOPS” Generally Accepted Small Business Offering Practices for small offerings
  4. Balance the needs between issuer-investor and economic development goals
  5. Promote small business equities as public policy
  6. XBRL taxonomy development for Micro-caps