Freitag, 8. November 2013

Comments On Proposed Rule: Crowdfunding

Subject: File No. S7-09-13
From: Oren Rosenthal
Affiliation: Attorney

November 4, 2013

These are sensible regulations that strike a balance between promoting innovative new products and services with the need to protect the public. I agree with the other comments stating that the $1 million exemption is too low. But only time will tell if these concerns are valid. If they are, the exemption amount can be easily raised.

Subject: File No. S7-09-13
From: Jordan Berg Powers

November 4, 2013

I am writing in support of allowing citizens without access to large savings or credit to still be a part of funding projects or ideas before they become full fledged IPO's. This will enable regular investors access to these projects at critical moments. Inventors will be able to get access to investors who may have a better understanding of the project simply because of their position and similar economic circumstances. Further this will allow not just the already economically advantaged to create wealth by supporting good ideas.
Thank you,
Jordan Berg Powers

Scott Purcell


Subject: File No. S7-09-13
From: Kevin G Smith
Affiliation: Electrical Engineer

October 31, 2013

I am an electrical engineer and though I make a decent salary (over 100k/year) I do not qualify as an "accredited investor" under the current rules. I do stock and mutual fund investments on the side and have an above average net worth. I would like to invest a small percentage of my income each year in startups as part of my well devirsified portfolio. This rule change would allow me to do that. I support this rule change and request it be implimented.

Subject: File No. S7-09-13
From: Louise Luster, Ms

October 31, 2013

I agree with everything the SEC is putting forth, but I strongly disagree with the proposition that, if your goal in the crowd funding campaign is not reached, you receive nothing. Kickstarter operates that way and I won't use them. Other platforms allow you to keep what you've raised. If you're trying to raise $10K to retain an attorney for your project, and you only raise $9K, that's $9K toward your financial goal. With Kickstarter and the SEC's proposal, you just spent 60 or more days of your precious time working hard to run your campaign and, by falling short, you have absolutely nothing to show for it.

I was very excited reading what the SEC is proposing until I arrived at the very last part about forfeiture. While the other sites that allow you to keep what you've raised normally charge a higher fee, what remains is still more than what you had when you started your campaign.

I hope you receive many comments similar to mine and that the SEC's proposed all-or-nothing restriction will not be included in their final decision.

Subject: File No. S7-09-13
From: Frederick C. Young
Affiliation: Perfect Circle Solutions

October 30, 2013

Dear Sir:
Issuers should not be restricted to one “intermediary” or even one type of funding.  Section 4(a)(6).
“Crowdfunding” should not be restricted to Online-Only.  Section 4(a)(6)(C).
“Funding Portals” should not be required to register with the SEC or FINRA.  Section 4A(a)(1).

1) Issuers should not be restricted to one “intermediary” or even one type of funding.  Section 4(a)(6).
New companies, startups, are trying to raise enough money to hire the people they need to get their company off the ground.  These companies should be able to seek accredited investors and non-accredited investors alike.  The SEC should not impose a restriction of one “intermediary” because they believe “it would be easier for investors to communicate with each other if they only used one platform”. 
The idea of the “wisdom of the crowd” is foolish.  Crowdfunding is a way for the smaller investors to learn about the early stage opportunities available to them, and to make small investments in such companies.  It is unlikely that communication with other small investors will be more important than the investor’s interpretation and assessment of the issuers business plan and related documentation.  Small investors are not stupid, and should not be treated as such.  The idea of a “Crowd” is that a lot of small investors decide individually to invest in one company, not that a group of small investors decide together if they should invest in one company.
The issuer should be able to use a variety of intermediaries and structures.  The issuer should be able to have a 504/505/506 offering at the same time as a Crowdfunding offering.  This would allow the issuer to accept accredited investors, as well as non-accredited investors.  The non-accredited investors in this case will be able to learn via communication with the more experienced accredited investors.  This is a win for all parties.
The purpose of the JOBS ACT is to create jobs.  Issuers need to raise money in order to create these jobs.  Restricting them to one intermediary and/or one funding mechanism will make it more difficult to raise the capital required.

2)“Crowdfunding” should not be restricted to Online-Only.  Section 4(a)(6)(C).
“Crowdfunding” should not be restricted to Online-Only.  The purpose of “Crowdfunding” is to allow smaller non-accredited investors to invest in early stage companies.  It is not important how the smaller investor learned about the early stage company.  If an issuer’s non-accredited neighbor wanted to invest $10,000 in his neighbor’s company, he should be able to.  There should be no “Online-only” requirement.

3) “Funding Portals” should not be required to register with the SEC or FINRA.  Section 4A(a)(1).
“Funding Portals” are an information delivery service.  They do not recommend or encourage investors to buy securities such as a Broker Dealer, therefor, there is no reason they be encumbered with the regulation and expense of SEC and FINRA registration.  The issuer using the “Portal” should comply with the SEC rules appropriate for an issuer. 
The “Funding Portal” is not acting like a Broker Dealer, and not working “with” the issuer to present the security, as would a Broker Dealer.  The “Funding Portal” is acting more like a newspaper, providing a space for the issuer to “advertise” his offering to accredited and non-accredited investors.  The transaction is then completed by the issuer and the investor, without the counsel and most likely, without the knowledge of the “Funding Portal”. 
“Funding Portals” should not be encumbered with regulation and expense by being required to register with the SEC or FINRA.

Thank you,
Fred Young

Frederick C. Young
Perfect Circle Solutions
3915 Mission Ave. ste D1-431
Oceanside, CA  92058

Subject: File No. S7-09-13
From: Rosemary Meling

October 30, 2013

I strongly object to the SEC getting involved in regulating the phenomenon known as "crowdfunding."  The whole point of crowdfunding is to by-pass the banks and venture capitalists who won't fund a business idea because they only look for so-called "safe" investments that follow conventional wisdom.  Well, sometimes conventional wisdom is wrong.  I speak from experience -it's tough to get a loan to start a pick-your-own garden patch if the conventional method of farming is corn and soybeans. Yet pick-your-own businesses have thrived. 

Certainly it is possible that someone will try to scam funders and I'm always okay with filing suit for fraud when necessary BUT I don't see the point of a whole new set of rules and regulations when fraud is the only problem. Fraud is already illegal. As for regulating the websites, the marketplace will weed out sites that engage in or fail to deal with fraud - word travels - but regulation will only hamper and stifle innovation.  

I have taken part in crowdfunding at and with modest donations for projects with which I am sympathetic or which I'd like to see succeed.  I am not stupid and neither are most people; we know it may be a longshot but we are there because we believe in the product or the principle of helping the underdog. A couple of projects I funded got off the ground and we will see how they do.  I wish them well.  I got my little bit of product or satisfaction from them, it was as advertised, and that is what I expected.  I have invested in a couple that are still in progress - computer games - and my kids have gotten access to the betas.  I hope the company succeeds because I like what they are trying to do and I believe in encouraging economic and industry diversity.  

I happen to think it is a shame that the entrepreneurs can't offer shares of their company but I realize it is because the SEC has already squeezed the little guy out there so I am content with a copy of a game or a box of jelly beans. 

Leave the little guys alone.  Don't set amounts, don't register portals, don't set time limits, don't require fees, and DON'T tell individuals how much they can invest of their own money.  You'll just break the system - which has sprung up because for the small investor or entrepreneur the other system you DO regulate IS broken.  They can't participate.  This is economics at its most basic level and it has worked for centuries. The minute the SEC starts adding fees, limits, professionals, and paperwork, money is going to be wasted and people are going to be prosecuted as criminals for no genuine wrong-doing.  We have enough of that going on already.    
You cannot keep investors safe.  It isn't the nature of investment to be safe.  It isn't government's job to protect people from their own choices.  Government is not a parent, but it is more interfering than any parent I have ever met and prevents much good, much innovation, and much success by placing obstacles in the way of ordinary people. 

All you have to do is prosecute fraud.  That's it. 

Subject: File No. S7-09-13
From: Sam H

October 27, 2013

We currently depend on the new startup companies to bring us out of the recession. These companies created a more productive economy, consumer spendings, new jobs. Before our economy is more stable that it is, I don't think our focus should be putting burden on the startup companies because we would like a more competitive market to stimulate the growth of the economy and our GDP. I would fully back and support with the SEC crowdfunding proposal when we have reach a better economic stability. I believe the transparency will lessen the possibility of a similar financial crisis in the future. At the moment, I do not support the proposal and I hope the SEC can support any form of new startups from succeeding than to hinder them with additional regulations.

Subject: File No. S7-09-13
From: David M Cromwell
Affiliation: Yale School of Management, Adjunct Professor of Entrepreneurship

October 27, 2013

The Crowd Funding concept is not going to work. Small investors will lose all their money most of the time, not many extra new ventures will start up and succeed, and only a few new jobs will be created on a sustained basis.

Authors of the legislation clearly do not understand successful venture capital investing and the key success factor. The key consideration is the management ability of management team behind the idea, not the idea itself. Can the founders / entrepreneurs make the idea happen, can they execute the business plan? This is a tough decision to make and requires a lot of exposure to the management team.

Incompetent management causes more failures in new business ventures than all of the other reasons, combined. Read any good textbook on venture capital investment or talk to some real VC firms -- almost all of them will say exactly the same thing.

As an venture investor, you cannot judge the abilities of the management team over the Internet. Real venture capitalists do not make their investments over the Internet -- they spend hours and hours interviewing the founders / management team, in person. Small investors cannot successfully invest over the Internet, either.

A better way to allow small investors to pool their money and invest in new ventures would be to allow the creation of special closed-end investment mutual funds -- managed by professional VC investors -- who would receive 20% of the profits, if any, just like a regular VC firm does. The Investment Company Act of 1940 makes this illegal, which is why no one does it. This is the law needing change, not the accredited investor rules.

The Crowd Funding idea is not going to work and a very large number of small investors will lose all their money.

David M Cromwell 
Senior Lecturer 
Yale School of Management

(Before Yale, I worked for JPMorgan for 30 years and ran the venture capital investment business there for six years, until 1995).

Subject: File No. S7-09-13
From: Paul M Niederer
Affiliation: CEO ASSOB Equity Funding Platform Australia

October 25, 2013

Answers to questions

1 The transparency of fees relative to raisings needs to be maintained and is the easiest to monitor. If say one million shares are issued at one dollar each and the funds are received that is the raising. The shareholders will be able to see how much they get because they know a million was raised. So a million including the fees should be the limit.

2 The million should be the maximum amount raised from unaccredited investors. Amounts above this raised from accredited and overseas investors, provided it is in the same investment offering document, or a previous or subsequent offering document in the same year should be able to be accepted.

3 Concurrent offerings are confusing and there is a risk unaccredited investors wouldnt understand the totality of the offerings. No to this.

5 Any Director of an issuer should have a maximum of one million from unaccredited investors in a 12 month period to prevent them raising in multiple entities. At Director level one million dollars from accredited investors a year should be enough to keep them busy.

8 The only way here is to put the onus on the investor. They need to self certify that they are under investor limits. Do you know what your neighbour, brother, uncle is worth? Probably not. How can you expect a portal or intermediary to really know this answer. Obviously if the portal or issuer have knowledge that there is a breach they should refuse the investment.

9 Accredited investors have this category because they supposedly know and have attested to this status. They should not be subject to investment limits. There needs to be though full transparency. One offer at a time, everyone informed.

10 In the million dollar cap the issuer should dictate the minimum parcel size as shareholders cost money to keep on the books. What is not mentioned is family. Why should there be limits on family money? Surely if someone, say a brother is on a salary of $50,000 and has $50,000 in savings he should be able to invest this in his sisters company.

12 While an offering can be marketed through several compliant channels there should be only one place (portal) where investment can be accepted. You need to differentiate the offering and its marketing. There is one offering document and one intermediary managing the transactional side. There may be several channels marketing it but they cannot accept investment.

13 From ASSOBs experience, while an online presence appears to be a major part of the activity in reality 90% of the work is done off line. A platform has both an offline and an online component.

15 Any member of the public should be able to access the platform after acknowledging they realise they could lose all their money and this is an area where high risk investments are marketed and if they cant afford to lose their money they should back out.

16 There are many items that cant be automatically managed on the platform. Due-diligence, acceptance of physical share applications, posting out share certificates, managing investor caps and limits, preparing videos and marketing materials. In view of how uninformed issuers and un-accredited investors normally are off platform input is essential.

17 Reporting requirements should be standard as per any corporation whether it is funded by crowdfunding or not. If their reporting obligations are not up to date they should not be able to raise funds. Every three months until a year after the raise they should 
give updates to investors.

18. It is the entity that has been invested and if the entity has not met its obligations then that entity should be precluded from raising funds. ASSOB has never let an entity behind in its reporting obligations to raise funds.

19. For idea only companies the Use of Proceeds needs to be detailed and updated regularly through the platform.

20. From our experience business plans are not necessary for capital raisings. What is necessary is a clear offering document that details the investment opportunity and the use of proceeds. Often consultants independent of the company produce business plans and they are totally divorced from reality. You can check Offering Documents on they give all the information to legitimise the raise and inform investors. Business plans are usually fluff compared to these.

32 33. The issuer should update the use of proceeds if there is a variance of 5 percent or more of the total amount raised. For example if there is $100k in the use of funds for research and development and in a million dollar raise they now need to spend $50,000 more taking if from another category this should be communicated to all investors including prospective investors. If there is a 50% change then investors should be approached on the basis they can have their funds returned if they are not happy with their new direction. It is critical that issuers realise that investment is on an offer and acceptance basis and that if they change the offer fundamentals then there are obligations.

34 35 On the ASSOB platform the Target amount is called the Minimum Subscription and no shares are allotted until this amount has been met. The maximum amount in your terminology is the actual sought amount on our platform. I believe this is more logical. This part of the JobsAct seems to follow Reward Crowdfunding rather than the way equity raises normally work. There should be a minimum amount that is useable, beneficial and essential to the raise. That means if they dont get everything they seek shareholders including the new ones will benefit. Structuring raises to purposely oversubscribe seems contrived and points to a lack of experience in how equity works. An investor needs to know upfront how much they will be watered down. Over-subscriptions are not usually good for anyone, meaning taking the money for the sake of taking the money.

40 The use of funds in the offering document should clearly detail all payments to the intermediary. That means the invest knows it the intermediary is being unreasonable to not.

41 A standard SWOT analysis with a risks section should be included in every offering document. You can see this in all ASSOBs

47 Filing of documents for the capital raising entity should be no different than for any other corporation requirements. Filing the offering documents and communications will make this whole area cost prohibitive. They should only file annual accounts and returns. The disclosures should be between the issuer and investor. Lodging them elsewhere will be for what reason? ASSOB has every offering document and its updates for the past 8 years. I cannot see any reason why they should be filed with the SEC. When that is a requirement lawyers and accountants get involved and the cost is too high and the legislation will sit there unused for raised under say $500k.

48 They should specifically state that they have no operating history. The investor needs to clearly and unequivocally know where the entity is at at the moment they invest. We have had a number of offer documents submitted to us that have beautiful financials that give the perception they are operating now when they are not. Best that everyone is honest up front rather than requiring them to fudge some figures. If they havent earned a dollar they havent.

49 The capital raising entity is just that an entity. In its offering document it should detail its funding history and share structure. It is a mistake to think that just because an entity is crowdfunding it is different than other entities. It is not. It is just raising capital in a different way but it still has a share structure, shareholders and a past. This must be exposed.

50 The best way is that anything that is required to be lodged with authorities (as a standard corporation with shareholders) is lodged on the portal as well as with the SEC so the investors and intermediaries always updated. Just because a company is crowdfunding it should not have different lodgement requirements. Eventually the word crowdfunding will disappear and this is just another way to raise capital. Having special rules is cumbersome and unnecessary and will become outdated.

51 Every company needs to prepare tax accounts. these should be published on the Portal within 3 months of the end of the reporting period. If they have not been in business long enough to have a full years figures then that is how it is.

52 If they have no operating history they need to say this loud and clear. When they do have financials they should have to lodge them with the authorities (if required) and on the portal.

53 Having a public accountant review them is sufficient.

55 If they have two years of financials then yes but few do.

56 Issuers should lodge on the portal quarterly report detailing progress relative to their use of proceeds. Financial statements are hard for most people to read and can hide lots of things.

57 The raising should be to do with the investment opportunity not relative to fiscal years and financial reporting periods. This seems to be an unnecessary spanner in the works.

58 Again involving accountants and certifying adds costs. Just because someone certifies accounts doesnt mean they are useful. It is the use of funds that is critical in this. That wont be in the financials. Tying it to raise amounts is also another layer of rules around accounts wont benefit a capital raise.

59 60 61 62 This is really a corporations act area. Just because a company is raising capital the type of accountant it has shouldnt change. This is about the entity. The entity raising capital, because of its legal form will have reporting requirements. It is these that need to be followed. If the corporation reporting requirements are not strong enough they should be strengthened. Just because an entity is crowdfunding shouldnt dictate the accountant it has and the way it reports to authorities.

63 to 71 Filing to the Commission is superfluous. There are annual requirements for every corporate entity they should be followed. Anything especially relevant to the capital raising should be filed with the portal. Commission filings should be also lodged with the portal for investors to see.

72 When the target amount is reached the shares are issued. Unless things have changed materially before then there should be no obligation to update. After the shares are issued there should be 3 monthly solvency statements and updates relative to the use of funds on the portal as cam be seen on I cannot see any reason why these update would be lodged with the authorities. It seems like extra work that none will ever look at.

73 Surely once they reach a threshold the shares are issued. This is not reward crowdfunding. An update on the portal which states whether the offer is open or closed or if over subscriptions are being accepted. If the portal is a registered portal why duplicate everything especially mundane things like multiple progress updates. Who in the SEC or wherever has time to read all these updates.

74 Anything that materially changes the offer needs to be reported on the portal. Offer opening, target reached, oversubscripton reached, offer closed. Any of these need to reported on the portal within say 3 days of the happening in reality it is the same day.

75 Yes Yes Yes exempt issuers from the requirement to file progress updates with the Commission as long as the intermediary publicly displays the progress of the issuer in meeting the target offering amount. One wonders why it would be any other way. Cant think of a logical reason.

76 to 79 Again lodging with authorities here seems to be overkill. If we look at how normal equity raises occur then if there is a change a supplementary document is added to the original offering and if here are large material changes a replacement document is produced.

Essentially, a Supplementary or Replacement investment document is to be used whenever an Issuer wants to do any of the following things: 
(a) to correct a deficiency in the original investment document. This means any sort of deficiency eg a material omission, a material statement which is false or misleading, or some error which is not material 
(b) to update the original investment document by providing information about something which has happened since the investment document was prepared. This is the case whether or not the information is material. For example, they can be used to tell investors that there has been a change in the issuers directors or the address of its registered office 
(c) to provide additional information, whether or not the information is new or material. 
(d) to offer additional securities in the same class as those offered by the original investment document. However, this will often make it necessary to update other information in the investment document, such as: 
(i) the type and number of securities which have already been issued under the original offer 
(ii) the effect of the increased subscriptions on the issuers gearing and cash position and
(iii) how the issuer intends to use the money from the increased subscriptions.

For the benefit of investors and Issuers alike, a Replacement or Supplementary investment document be lodged with the portal if, during the offer period, the issuer becomes aware that the investment document is deficient or outdated in that: 
(a) the investment document contains a material statement that is false or misleading 
(b) there is a material omission from the investment document 
(c) there has been a significant change affecting information in the investment document
(d) a significant new matter has arisen, and this matter would have been included in the investment document if the matter had arisen when the investment document was being prepared or 
(e) it may affect the rights of investors who accepted the offer before getting notice of the variation (for example: reducing the minimum subscription level of the offer). 
Replacement Investment Documents 
In effect, a Replacement investment document is merely an integrated version of a Supplementary and an Original investment document.

A replacement investment document must have the same wording as the original investment document, except for: 
(a) the provision of new or additional information and 
(b) the correction of deficiencies in the original investment document.

Each page of the replacement investment document must contain a clear statement in bold type saying that the document is a replacement investment document which replaces the original investment document. 
For example, the statement could read: 
This is a replacement investment document dated insert date. It replaces an investment document dated insert date, relating to shares of insert name of issuer.

Supplementary Investment Documents 
A Supplementary investment document accompanies an original investment document.

Each page of a supplementary investment document must contain a clear statement in bold type stating that the document is a supplementary investment document to be read in conjunction with the original investment document and any other supplementary investment document already issued.

For example, the statement could read: 
This is a supplementary investment document intended to be read with the investment document dated insert date and supplementary investment documents dated insert date and insert date, relating to shares of insert name of issuer.

80 to 82 Whatever is required to be lodged normally by the entity type should be lodged. Any capital raising specific communications should be via the portal

94 to 95 The offering is the offering. In the future it will be totally web based and offering documents will be a thing of the past. As long as the investor certifies at the time of investment that the information it has read on the portal, which is on the portal forever is the basis on which they invest then what does EDGAR and all the other acronyms really contribute. Maybe in the future everything will be totally video based, we dont know but the important thing isnt if it is lodged in a hundred places or certified by an accountant with a string of letters after its name it is of the investor confirms they are investing on the basis of the information on the portal and other documents at the time of the investment.

96 Any investor referred by an issuer or anyone must sign warnings that scare them into recognising they could lose all their money if they proceed. The onus should be on the investor if they proceed.

97 No. If there is a breach this can always be found by asking the investor how they found out about the offering. Doing it the other way around is cumbersome and a waste of resources.

99 Random people seldom invest due to advertising no matter how prolific. Allowing blatant advertising of offerings will show over a period time it is a waste of money for promoters. It sounds exciting but people invest because they have a connection to the idea, the people, the intermediary, the geographical location or a re genealogically connected. While it would be nice to be able to advertise offerings we have never found it to be a profitable endeavour.

103 Yes The proposed rules would allow an issuer to communicate with investors and potential investors about the terms of an offering through communication channels provided by the intermediary on the intermediarys platform, so long as the issuer identifies itself as the issuer in all communications.

105 Yes. The investor should learn about the offering on the platform not out in the public domain. However publications and other sites may compliantly advertise the offering, and be paid for this, provided the links go back to the transaction platform.

106 All compensation should be detailed in the offering document so that the investor can see up front what is happening with the money. There should be 100 percent transparency.

107 If the issuer senses the intermediaries marketing is not working they should be able to engage someone else to do the marketing side. This is not the intermediaries business and as long as they get their commission they should not be bothered.

108 If it is not taken from the Use of Proceeds then well done to them they should have no need to disclose their charity

109 110 111 The thinking is wrong here. On the ASSOB platform the Target amount is called the Minimum Subscription and no shares are allotted until this amount has been met. The maximum amount in your terminology is the actual sought amount on our platform. I believe this is more logical. This part of the JobsAct seems to follow Reward Crowdfunding rather than the way equity raises normally work. There should be a minimum amount that is useable, beneficial and essential to the raise. That means if they dont get everything they seek shareholders including the new ones will benefit. Structuring raises to purposely oversubscribe seems contrived and points to a lack of experience in how equity works. An investor needs to know upfront how much they will be watered down. Over subscriptions are not usually good for anyone, meaning taking the money for the sake of taking the money.
In regard to should we require that investments in excess of $1 million be allocated using a pro-rata, first-come, first-served or other method, or should we leave that decision up to the issuer. Lets think though this logically. An entity has sought investment. Investors have completed share applications. The Directors of that company accept the ones they want to. Some people you dont want as shareholders for a variety of reasons. It is straight offer and acceptance. Noone else should dictate this.

126 To avoid pressure selling caused by a pecuniary interest why not say that the broker dealer or funding portal can invest but only of they close out the offering meaning they are never in competition with prior investors.

137 The platforms / portals should feel confident they scan report any breaches and wrongdoings to the authorities and also send disgruntled investors the same way. Portals can have control structure, rules, form and layout but it a breach occurs where they dont have the teeth to sort it the authorities need to be involved

150 Most investors only retain the offer document. This document should clearly disclose what the intermediary receives upfront and as a percentage of the raised funds. There needs to be full transparency in this area. If this changes a supplementary or replacement document needs to be issued with the new arrangements.

153 All information should remain on the portal for a period of at least one year after the raise is complete. After this period people can be referred to the company secretary of the issuer. In practise we have had companies profiled for 5 years and all information is always available provided they pay their annual fee. It is never deleted.

155 We have found that a Url direct to the issuers page on the platform is sufficient.

156 Once an offer is open for investment all information on the platform should be available. Not sure why anyone would wait 21 days. The opening of the offering should come with complete information and access

157 We have found that after about a year after the offering closed funded companies tire of doing 3 monthly solvency and director responsibility updates. We cannot legislate for them to keep communicating like you can but I believe that they should have to do this for at least 2 years after they got the money

158 Why not use a self certification system where say 100points need to be reached as they do for identification in some countries for drivers licenses

The latter category may possibly work on a self certified 100 points system. 
(just a guide not meant to be accurate they need to reach 100 points)

Member of Angels Group 80 points 
Director of Public Company 40 Points 
Member of Directors institute 80 points 
Company Secretarial Course 40 Points 
Corporate Governance course 40 points 
CPA/ CA / etc 50 points 
Have one of the following entrepreneurial qualifications 30 points 
Has attended an incubator or accelerator intake 30 points 
Immediate family 80 points 
Relative 40 points 
Have known the issuer for more than 10 years 40 points

159 An intermediary may rely on the representations of a potential investor. Especially if they self-certify as follows

The latter category may possibly work on a self certified 100 points system. 
(just a guide not meant to be accurate)

Member of Angels Group 80 points 
Director of Public Company 40 Points 
Member of Directors institute 80 points 
Company Secretarial Course 40 Points 
Corporate Governance course 40 points 
CPA/ CA / etc 50 points 
Have one of the following entrepreneurial qualifications 30 points 
Has attended an incubator or accelerator intake 30 points 
Immediate family 80 points 
Relative 40 points 
Have known the issuer for more than 10 years 40 points

161 Only if they have doubts about the investor self certification

166 On ASSOBs platform everything published on an issuers page is signed off by the Issuer. FAQs are good but random unmoderated comments would never be tolerated as people could write things like Invest now this is going to triple your money guaranteed I do not believe any unmoderated published comments should be allowed for this reason. There could be a button Click here to submit anything about the issuer investors should know

200 As the portal is only a publisher of information prepared and signed off by the issuer and funds are not handled by the portal but by the trust account authority between the issuer and the trust account wouldnt it make more sense, though impractical to have the issuer lodge a $100,000 security bond. The portal is just a publisher and the consummation of the transaction is between the issuer and the investor. A fidelity bond will further limit this market to established broker dealers and investment banks which is not where innovation and tomorrows systems evolve from. I cannot see a reason for a fidelity bond. It is a hangover from the previous era and any in place certainly didnt stop what happened during 2008 and 2009

201 No amount is necessary. Funds are not handled and they are just publishers.

202 Even more distant. What is the logic here? This is a hangover from a non-transparent financial services sector. A transparent platform will not have these problems

203 No as it is not necessary. This is a hangover from a non-transparent financial services sector. A transparent platform will not have these problems

204 I cant understand your link with protecting investors. You need to prove this before pushing for a fidelity bond. Investors are far better off through using a portal than not. With this logic anyone seeking investment should lodge a fidelity bond. What about lawyers, accountants etc etc etc

220 Ranking should be mathematically (including pure random) not value driven. Most raised, soonest to close, most investment, least investment etc etc are OK but our favourite staff pick should be no gos.

230 Ratings should be mathematical rather than value driven. Most visited, most downloaded etc. Anything else can be enticement.

231 Funding portals compliance policies and procedures is very much part of their IP it should not be specified by an external party.

285 How similar or different is a securities-based crowdfunding offering from a non- securities-based crowdfunding offering? In our experience very different.

With pledge crowdfunding the contributor is expecting a reward. A gratification. Probably instant gratification. Meaning if they contribute $100 for a watch they are pretty sure they will get the watch within a few months. This also draws far more people than equity raises.
However with equity or investor crowdfunding there is uncertainty and hope. The investor hopes that when they invest they will get their money back or better but it is uncertain as to when this will happen. Meaning if they contribute $20,000 they trust that the founders of the company will be good custodians of the money and will deliver on the promises they have made or the picture they have painted. Hope also must endure. From the time of the crowdfunding investment until its return, or not, communications need to be maintained with investors because they are still living on hope.
They hope that they will at least get their money back and it should not be a surprise after three years if they dont.
Therefore to pump up an equity raise to get more investors you basically need to misrepresent the opportunity which breaches security regulations.
So they are totally different animals. They seldom will attract similar projects because investing in an entity never gives instant gratification.

288 I believe the wisdom of the crowd, if harnessed, especially in the formative stages by polling friends, family, fans and followers of the issuer is better than checking on Dun and Bradstreet or a similar service. There is much not in the public domain that those near and dear know. If not one of their friends, family, fans and followers invest initially the platform needs to find out why before marketing far and wide.

291 We have had large investment in ASSOB matters ranging from $200,000 to $1.5 million. Admittedly from accredited investors. Without this investment all previous investment would have been lost.

294 It would be good if we could run our funding portal for $90,000 a year but with in-house legal and compliance to ensure everything published does not misrepresent the offering I doubt it could be run under $480,000 minimum. $90,000 is one person to handle thousands of tasks. Not practical not sure how you could come to a figure like this.

Subject: File No. S7-09-13
From: Jeff Sarles

October 25, 2013

Dear whomever it may concern at SEC and elsewhere,
I strongly disagree with the proposal to regulate crowd funding for several reasons.
1.  It limits the amount that can be raised, which defeats the purpose of crowd funding - which is primarily to avoid having to get funding from corporations.  
2.  It does not fix the real issue, which is FRAUD.  I would accept a proposal from SEC that would deal with the fraud aspect - However, this would be tricky - sometimes projects fail and nobody gets what they paid to the crowdfunding (which is an inherent risk comparable to investing in a startup that may fail).  There should be a manner in which people may seek to get their money back if there is neglible work/progress being made on the idea that was funded.

In short, I think that crowdfunding shouldn't be regulated, or if it is, only from a fraud aspect through a court of law through class actions.  Thank you

Your friend in Zion
Jeff Sarles

Subject: File No. S7-09-13
From: Rebecca Ramsey

October 24, 2013

I believe that a couple of the regulations included in the Crowdfunding Rules are hurtful to independent start-ups and to the lower-middle-class individuals who wish to fund them, and that they should be reconsidered.

In its article previewing the proposed rules, Forbes estimated that the costs of the disclosure documents, background checks, and annual reporting stipulated in the rules could run as high as $100,000 a year, which is an immense and prohibitive sum for independent start-ups who may not even raise that much. This will unfairly discourage many independent projects from even attempting crowd-funding in the first place.

In addition, the annual contribution caps that require people at below $100,000 to contribute no more than 5% of their net-worth and people at $100,000 and above to contribute no more than 10% are problematic for two reasons:

Firstly, it takes the magic element that makes crowd-funding attractive to lower-middle-class individuals (the ability to contribute to the development of goods, products, and services that they want to see developed and marketed) out of their hands by restricting them to meager contributions. Instead of being able to invest heavily in a project they believe in, people with limited incomes and low net-worth will be restricted to giving developers only a small fraction of what they may believe a project is worth to them. It may not be the wisest investment they ever make, but they should still have the right to make it, just as people have the right to go to Las Vegas and gamble their money away or spend it all on clothes or food or household furnishings or whatever. Without the ability to invest whatever they believe a project is worth to them, lower-middle-class individuals will lose the power to individually contribute in a major way to projects that they believe are worthy, and that will significantly reduce the appeal of crowd-sourcing.

Secondly, the contribution caps also take the power for lower-and-middle-class individuals to influence and promote and contribute to the development of goods and services that they want to see developed out of their hands on a universal level because the caps unfairly allow people with greater net-worth the ability to invest far more money than those of more meager financial resources. Not only will this result in individuals of greater net-worth acquiring an inordinate amount of control over the development of crowd-funded products, goods, and services by making those projects dependent upon the donations of the wealthier class, it will also result in crowd-funded projects focusing their investment strategies upon attracting individuals of greater net-worth to the exclusion of individuals with more meager means.

I urge a reconsideration of these proposed rules and regulations. Please take into account the desire for lower-middle-class individuals to be able to directly contribute in a meaningful way to projects they feel passionately about, and don't discourage independent start-ups by unfairly requiring them to spend 100,000 a year just to try and crowd-fund. Crowd-funding is a great tool for the general public to support the creation of things it wants to spend money on, and it enables poor individuals to create independent start-ups while appealing directly to that general public, without needing to acquire the donations of a few wealthy individuals first. This leads to better, more desirable products, a more engaged general public that is passionate about what it spends money on, and a sense of public accountability on the part of the independent start-ups who must take into account the desires of the general public if the general public is able to contribute as much as it wants to projects whenever it wants to.
Thank you and have a nice day.

Subject: File No. S7-09-13
From: robert c guinto, Jr.
Affiliation: President, Non Profit Capital Management, LLC

October 24, 2013

Based on the 585 pages that the SEC took to write how a start-up can raise $1,000,000. What the SEC has written is a document that increases costs to start-ups, that goes against the intention of Congress. 

There is nothing in the document by the SEC that allows a person starting a business and has a business plan to solicit funds and let potential investors make their decisions about its validity. The thousands of dollars being asked to incur as a start-up is the difference between having the cash to pay ones bills and spending lots of money and prayer some one likes your idea. The SEC has designed a track that will create more failures because it is asking individuals to investment their own capital that should be used on the business and not raising capital. The success of a number of companies has been about sufficient cash just at the most critical time.

Based on the rules the SEC is outlining a large number of business would be eligible for loans from their community banks because they would show to have existed most likely for a number of years or have the personal worth to seek the loan themselves and not need investors. The SEC has written a document to allow firms to act as Portals to not be sued. The document reads over and over about protecting the SEC and financial entities whom want to be Portals.

I have helped many small businesses get started and after having read the 585 pages I went back to the bill passed by Congress and said what a waste of time for the thousands of businesses this could have helped.
As outlined if you already have money then this is a great way to expand ones opportunity to bring lots of money into a new venture using money from individuals. For those starting out without cash or little cash, mortgaging their house, using credit cards, tapping their retirement, using their savings it fails.

These 585 pages does nothing to protect any investor and manipulation becomes easier when things are complex or one can give a false impression that there is a layer of review.

Review and electronic enforcement is the best way to lower the risk that investors will be manipulated. I point to the Madoff case as a failure to us data. This firm stated over and over it had made certain transactions in the market place and yet the market place did not record said volume. Thousands of individuals trusted that information was true, when in fact their financial representative did not hold Madoff to the financial accountability being asked in Crowd Funding.

When it comes to obtaining an Audit or even a Review the minimum is $5,000. However, when you read the opinions there are all the legal language of what the Auditor cannot represents. However, the fact that there are many examples of audits not being true reflections of their financials with Enron being the best example of manipulation I ask what value does it add.

Further, tax returns unless noted with a stamp from the IRS and as a PDF from the IRS there is no true way to know if the posted document is a true reflect of the return.

Each investor has their own level of Trust required to decide whether to invest. Each Investor has specific ground rules they like to use in investing. Each document the SEC is requiring may or may not help to facilitate a level of Trust on whether they will proceed or not.

When speaking to individuals who have thought about placing $10,000 or $25,000 in a start-up or one that wants to expand it comes down to the same statement. Where can I find out about what start-up opportunity is out there?

Start-ups and those seeking to expand want a simple process to raise money. They are willing to explain who they are, what they want to produce, provide their business plan, show either their personal finances or business finances or both and state what they plan to do with the money and what rights the investor gets with the investment.

Building Trust is first and foremost in bringing together investors and the first employees to accomplish a venture.

If the SEC really wants to make the biggest impact create your own Portal. Create the punch list of what you need to receive and when it is all complete the solicitation can go live on the web site. This way you have 100% compliance and less mistakes as businesses try to comply. This results in ways to track outcomes that statistically will be significant. The SEC will know what is working and what is not. Having the annual tax returns posted once filed with the IRS is a good measure of progress.

Please go back to the definition of start-up. Where in the process must a company be in its business plan in order to be eligible for the SEC Crowd funding? The SEC document seems to be saying you need to have revenue.

Crowd Funding is no more risky than buying stock with advice or without. We are all adults and make decisions all the time that either cause us to lose or gain financially.

Congress passed good legislation. The SEC needs to make access to investment opportunity equal to all investors.

Subject: File No. S7-09-13
From: Charles J Hamman

October 24, 2013

My name is Chuck Hamman and I started a small business in Chicago. I make a powdered supplement drink called Sleepyhead.

I invested 100% (about $160,000) of my personal savings into my business. Im tapped out. I am considering crowdfunding to raise much needed capital for my business to support our growth.
I was thrilled to hear about the SECs proposal. After reading it, Im incredibly disappointed.
Heres an outline of the flawed rules and possible solutions.

1. A company would be able to raise a maximum of $1,000,000 annually 
a. Problem: What if a company needs to raise more? What if investors want to invest more? When a company experiences exponential growth (i.e. if I land a national contract with Walgreens), they need to raise capital at a moments notice. If a company has good traction with crowdfunding, let them continue to lean on it. Forcing them to find another source of capital wastes an incredible amount of time and money. Valuable resources that a small company like me doesnt have. Putting a ceiling on the amount of capital is putting a limit to a companys potential to grow when opportunity strikes. Investors lose, owners lose and consumers lose. What a shameful waste.

b. Solution: Eliminate the cap. Give company owners the flexibility adapt to their unique needs. If a company is growing like a weed and investors want a piece of the action, let them Investors win, owners win and consumers win. Let the market decide the cap. Not you

2. Investors are permitted to invest up to $2,000 or 5% of their annual income 
a. Problem: What if an investor wants to contribute more? Who are you to say where someone can put their money?

I have a moral problem with the principal behind this rule. It is like mandating the amount someone could spend on a new car. What if you said people are not allowed to spend more the 5% on a car? Or a house? On education? What kind of society does that sound like? Its worse than communism. 
Oddly enough, its perfectly legal to go to Vegas and put 100% of your income on black.

Here are the consequences of this rule. It will severely limit the total sum of capital invested. Investors will have less experience investing, less money will be available in the crowdfunding universe for owners to get their companies started. Less money for new jobs, new products, new ideas, everything. This is the most deplorable rule youve created yet.
b. Solution: Again, eliminate the cap. Require only that investors are sound-minded adults. After all, were adults. Dont treat investors like children. People should be allowed to spend/invest our money however we wish. This limit accomplishes very little, but it does great harm to everyone.

3. Securities could not be resold for one year. 
a. Problem: Buy low, sell high. Thats the rule for anything (not just the stock market). To follow this rule, you need to be nimble to buy or sell. 
b. Solution: Get rid of this rule. Once an investor owns a security, let investors buy and sell whenever they want.

Everything else looks agreeable. I don't think many of the additional rules are necessary, since there's a strong incentive for crowdfunding sites to do exactly what you suggest.

Your proposed rules will do vastly more harm than good. Please change them to give us (investors and owners) more freedom.

Crowdfunding is rocket-fuel for our economy. There are endless possibilities. Please stop interfering this brilliant new concept. Give it space to flourish and great things will come.

If you would like more, heres where to find me:

Chuck Hamman 
[phone number and address redacted]

Thank you for your sincere consideration.
Chuck Hamman

Subject: File No. S7-09-13
From: Ubon Isang
Affiliation: Executive, Generation Enterprise Corporation

October 24, 2013

Comments on S7-09-13 Crowdfunding

I am a member of a start-up company here in Minnesota I am pleased to hear the SEC proposal to move forward with the exemptions regarding Crowd funding. I strongly believe that this proposal will allow entrepreneurs like me to raise capital that will give us the power to successfully develop our product and bring it to the market. Crowd-funding start-ups like ours will have the better chance of surviving because we will have the finances to help us in developing our products. As an entrepreneur I believe Crowd-funding will ease the pressure of Start-Ups going to banks for loans, or racking up debt via credit cards just to develop a product. 

As many legitimate start-Ups the challenge has always been securing funding to bring the company products to the market. As an entrepreneur I strongly urge the SEC. We have been to banks asking for advice on how to secure business loans and so far have been turned down by many banks because we lack historical financial statements and assets to use as collaterals. So I believe that this proposal will allow new and established entrepreneurs opportunities to bring their ideas or products to life and help rebuild this great country. 

I believe the proposal will overall benefit many start-ups and the idea of financial audit after reaching $500k through crowd-funding may be a challenge because it will require small start-ups to spend more time conducting financial audit instead of focusing on developing their products and operations. I am certainly hoping the proposal will be adopted soon as my start-Up company is getting ready to solicit investors to raise capital. I look forward to seeing the SEC adopt this proposal and allow companies to start raising capital. 

Subject: File No. S7-09-13
From: Wendi C Hawley, MA, ATR-BC
Affiliation: CEO, TraceFind Technologies, Inc.

October 24, 2013

To the SEC Board,

This move by the SEC is long awaited, and will be thoroughly used to get important ideas into the market.I appreciate that the rules and reg's intended to protect the investing public will be in place, as they will also 
protect the companies that use the crowdfunding portals.

Since our patent was issued in 2007, we have found that venture capital and angel investing mechanisms are failing to stimulate development in small creative organizations like ours. They are unwilling to step into the earliest stages of development.

The ability for smaller investors to participate in equity purchases will not only help them to engage in potentially lucrative bottom floor entry with subsequent increases in value, but will allow companies with specific market focus to engage the market and those who staff it. This will create a link to the market by allowing for pre-product information to be disseminated to a wider base of interested parties.

For our project, which will provide a scanner that detects Retained Surgical Instruments before closure so that they can be removed in the operating room, this means that nurses and other staff who are seriously affected by patients being harmed by items left behind will be able to contribute to the solution to the problem. And it will save immeasurable time for staff and patients, as counting procedures will be eliminated. If they have the option to purchase equity in the company that will solve this $1.9B health care problem, it will help them feel that they are doing something about it.
As things are now, their incomes are too small for them to participate, when even a few hundred dollars would help to bring the scanner to market.
I am fully in favor of the SEC decision to allow equity based crowdfunding, and applaud the vision and fortitude it will take to create and enforce the rules.
Thank you for moving forward with this important new source of start-up funding. It is my hope that many new and significant products or services will come into being as a result. We are gearing up to participate.

Wendi C. Hawley, CEO 
TraceFind Technologies, Inc.

Subject: File No. S7-09-13
From: Robert Shatz
Affiliation: CEO, CarbonTech Global LLC

October 24, 2013

Questions 165 and 166 relate to risk for retail investors. Even when retail investors invest into initial public offerings on the stock exchanges, they are allowed to sue the issue or the broker if they lose money. Sophisticated and institutional investors are expected to take full responsibility for the loss of all funds - not the broker or the issuer.

The point is that once one crowd funding deal goes bad, the retail investor will sue to get their money back. If you tell them that they already signed a document saying that they would take full responsibility, retail investors will argue that they did not know the true risks and were not told the true risks even though they sign the risk disclosure document. They do that in the publicly listed markets already and get away with it.

Therefore, a key part of the disclosure process SHOULD BE to explain that lawsuits only work for fraud or negligence. Lawsuits cannot be filed just because the retail investor loses their risk capital.
Lawsuits by retail investors on deals that fail will be the undoing of crowd funding.

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