Category Archives: Crowdfunding Voices

Commissioner Piwowar Shares Insight into Securities Rulemaking, Fintech & SEC Direction on Capital Formation

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Crowdfund Insider | | July 20, 2017

Commissioner Michael Piwowar, who was Acting Chair of the Securities and Exchange Commission (SEC) until the successful appointment of Jay Clayton, visited with David Burton of the Heritage Foundation earlier this week providing a unique glimpse into the world of the SEC.

Burton, who is a Senior Fellow in Economic Policy focusing on entrepreneurship, securities law and more, told Crowdfund Insider after the presentation by Piwowar he was encouraged by the exchange (note that Piwowar was speaking on his own accord and not on behalf of the SEC);

“Commissioner Piwowar’s remarks were cause for optimism,” said Burton. “The SEC appears poised to take steps to improve the regulatory environment for entrepreneurs, to democratize access to high return investments and to enable Fintech innovation. I am glad to see that the SEC is thinking seriously about how it can remove regulatory impediments to financial innovation, entrepreneurial capital formation and economic growth”

So what did Commissioner Piwowar say?

Regarding the newly appointed Chair of the Commission, Jay Clayton, Piwowar explained;

“It is awesome working with our new Chairman Jay Clayton,” stated Piwowar.”Think back to before the election and we had a Chair who thought about enforcement first and the Dodd-Frank death march second. We have a new Chairman who has come in, chosen by the President, to have an agenda that remembers we have a threefold mission which is not only to protect investors and maintain fair and orderly markets but to also promote capital formation.”

Piwowar said that one of the things the Commission would like to do is to create a capital formation agenda. There is much the SEC can do without legislation. There are even things that can be done at the staff level, without a Commission vote.

Asked about the definition of an Accredited Investor (a rule that blocks most individuals from participating in private securities offerings) versus a sophistication qualification and whether the SEC is open to updating this outdated rule?

“I for one have a question even to the premise of having an Accredited versus non-Accredited Investors definition,” said Piwowar.

The rationale is that somehow the SEC is protecting investors. What they are, in fact doing, is protecting investors from risky yet higher return investments. Piwowar said that main street investors are not sharing in the returns being captured by Silicon Valley types.

“The average investor is being prohibited from investing in these securities,” stated Piwowar.

Check out:  Crowdfunding proponents blame regulators for slow growth

Are they too risky perhaps?

“As a former finance professor what we teach is the benefit of portfolio diversification and a lot of these securities would provide diversification for investors in their existing portfolios… this is something I have been pressing the attorneys at the SEC to think about. The SEC is mostly a lawyer driven agency and for historical reasons we have been thinking about risks of an individual security offer … I have been trying to get people to think more broadly. Look, it is not just the risk of that security in isolation but it is risk with a portfolio a [consumer] already has.”

Piwowar questioned having these “artificial” distinctions that disenfranchises the majority of the investing population.

This differential between Accredited and non-Accredited investors has been exacerbated by the fact that promising young companies are staying private for as long as possible. So what can we do to make it more likely that a company goes public? As the number of IPOs have tanked…

“I still think there are things we can do,” stated Piwowar. “Look at the JOBS Act.”

Piwowar said that under the Emerging Growth Companies provision, there were about 80 biotech companies that went public the very first year. Little changes can have a huge impact. Piwowar said the SEC Staff is very interested in being more collaborative with people interested in boosting capital formation. The change in tone at the top is helping to push this along.

See:  Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency

An Avalanche of Information

Burton pointed to cumbersome disclosure requirements that add little value for an investor nor the firm. Think of the conflict minerals disclosure, a regulatory act that did more damage than good. Scaled disclosure and outright exemptions for smaller companies could help ease the crushing regulatory burden on the economy.

Disclosure documents have become so immense they now obfuscate instead of inform. Information should be accessible but not overwhelming. A 10-K today is not the same thing from years ago. Piwowar shared an experience of reviewing the document for when Wal-Mart went public. It was 28 pages long. And one of those pages was blank.

Should smaller companies be granted a Blue Sky exemption and not have to seek approval of each state securities regulator? Piwowar said this is something the SEC is working on with state securities regulators.

Speaking about Title III, Reg CF crowdfunding, Burton called this exemption a disappointment. According to Burton, Title III has just about every regulatory burden you can imagine.

Piwowar agreed.

“I agree with you that not only has it been a disappointment but it is also not a surprise. In fact, when it came time for us to finalize the rulemaking I actually dissented and voted no. As you mentioned, there are a lot of things that are prescriptive for the funding portals and the limitations on how much could be raised. A lot of that is statutory unfortunately. When the JOBS Act was working its way through Congress the House passed a sensible crowdfunding [Reg CF] provision for the JOBS Act which basically left a lot of flexibility for the SEC to set the regulatory regime and adjust as necessary. When the JOBS Act went over to the Senate Harry Reid decided to skip it through Committee and let it go to the floor directory and allowed only one amendment and that was the Crowdfunding amendment. The Merkley-Brown amendment was substituted in … which is highly prescriptive and does not give us very much flexibility at all in terms of allowing for a framework that works. That was proven challenging. The reason I dissented was not only because it was prescriptive but then the majority of the Commission at that time decided to make it even more difficult.”

Piwowar said the Commission could go back and try to change some of these provisions but he believes Congress should move first. Piwowar mentioned specifically the Financial Choice Act (currently navigating Congress) which includes capital formation provisions.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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First Block Capital and FrontFundr Launch First Ever Canadian Bitcoin Trust

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TechVibes | By: Max Greenwood | July 19, 2017

First Block Capital, in partnership with FrontFundr, announced today the launch of the first-ever Canadian Bitcoin Trust.

This trust will provide eligible investors with a safe and easy method to invest in bitcoin. Bitcoin is perhaps the most recognizable cryptocurrency and this step forward will allow consumers to invest and deal with the new asset class.

“The Canadian Bitcoin Trust is an open-ended unit trust that enables investors to get exposure to the price of Bitcoin without having to worry about buying and securing Bitcoin,” says Sean Clark, cofounder of First Block. Clark was also the founder of Shoes.com which abruptly shut down early this year.

The overall value of Bitcoin and other cryptocurrencies has risen from $30 billion in December 2016 to over $100 billion in June. Many investors have expressed serious interest in buying into the market but until now there have not been secure and reputable methods to do so. Transaction processes were very technical and the idea of an online only currency that did not have extensive regulation was daunting.

First Block Capital’s new announcement with FrontFundr simplifies the method and removes roadblocks for investors who just want to become cryptocurrency asset holders.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

 

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Why Ethereum’s price is dropping

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Venturebeat | | July 13, 2017

Anyone following the cryptocurrency market over the past few months has seen the spectacular rise and pretty dramatic fall of the value of an Ether. The currency rose from the $100 range to the $400 range from May to June; and from June to July we’ve seen it drop back down to the $200 range. The question is, why is this happening now?

With over $500 million worth of Ether raised in initial coin offereings (ICOs) during June alone and a feature on the cover of Forbes, the market has reached fever pitch.  What we are now witnessing is the other side of this phenomenon.

Here are four reasons for the drop:

1. Post-ICO startups are cashing out to reduce risk

These projects have costs. And, for now, those costs are in fiat currency.

While you can buy some things with Ether and Bitcoin, most of the expenses of running an organization and the expenses of the people who work in those organizations still happen in boring old dollars, euros, and yen.

See:  No, Ether Isn’t “Getting Crushed.” Here’s What’s Really Going On.

Let’s assume for the moment that the startup projects are not scams or pump and dump schemes (I’ll get those a bit later). Still, these projects have to get actual money to pay for stuff and, thanks to blockchain, we can see it all happening. So when EOS decides to deleverage some of its ETH risk, everyone knows about it.

And when Tezos, which I predicted would raise $250 million (it was just a little bit under that), $232 Million: Tezos Blockchain Project Finishes Record-Setting Token Crowdsale, it will do what anyone does: reduce risk.

Scale this out to every project and assume for a moment that every ICO is going to take 10-20 percent of its ETH “off the table” and put it in fiat to avoid the “crash that everyone knew was coming, but didn’t know when,” and now you have $50-100 million worth of sell orders coming in at the same time. That’s a decent percentage of the market moving in one direction at once. And that’s just the ICOs from June.

But wait, as they say, there’s more.

2. And they’re cashing out to buy technical talent

Remember why all of these projects are raising money. For the most part, it’s to find talent to help build the vision.

The challenge? Blockchain technical talent is in ridiculously short supply. Combine that with very high demand and you have market forces that my nine-year-old can explain.

There’s a war for development talent, and it’s being fought at the cash register. The fiat cash register.

It is why one article recently proclaimed “Why Brave’s $35 Million ICO May Not Be Enough for a High-Tech Hiring Spree”

3. New investors have come in — with shorter timeframes

I’ll throw one other possibility out there. The advent of new types of investors in the space.

See:  Blockchain Will Disrupt Every Industry

Over the past few months, we’ve seen an explosion in the value of the crypto-market. As a result, any money manager worth his/her salt wants to get “in on the action.”  Everyone wants to be Olaf.

It’s not surprising that Forbes recently profiled 15 New Hedge Funds that Want In On 84,000% Returns. That’s just the tip of the iceberg.

The more “professional” traders are thrilled with month/month returns that ETH and the others are yielding, so naturally they are going to take profits as well. They don’t have the HODL (Hold on For Dear Life) perspective that many of the O.G.’s (Original Gangsters) in the space have.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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CFA report: Fintech unlikely to replace traditional sector

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ProfessionalPlanner | By Cut+ Paste | July 12, 2017

The new FinTech 2017: China, Asia and Beyond Report (Report) released by CFA argues that, while FinTech companies were usually strong at technology and applications, they are mostly inexperienced in financial sector operations and therefore unlikely to completely replace the more conventional sectors of the financial services industry.

One of the Report’s authors, Mr Larry Cao, CFA, Director, Content Asia Pacific, CFA Institute, said FinTech firms had a natural growth curve in areas where they were usually part of a system and built smart experiences that banks couldn’t or didn’t want to build.

See: OCC sets stage for FinTech firms to charter as national banks

“First, the most ideal development for FinTech firms is to collaborate with banks; each party has its strengths, and cooperation should be the long-term win–win strategy; second, banks are weak in technological segments like P2P while FinTech’s offer more room for innovative ideas and technological skills but at lower profit margins; and third, FinTech enterprises continue to capture the technological development market because traditionally banks haven’t been eager to develop these kinds of businesses. However, a change in attitude would pose the biggest threat to FinTech enterprises given the banking industry’s sheer scale and resources.”

Mr Cao said discussion had evolved in recent years from simply defining Fintech to more involved narratives about its potential drawbacks.

“While FinTech will have a significant and potentially revolutionary influence on a broad set of sectors within the global financial services, FinTech leaders interviewed for our Report noted that startups needed a large flow of customers, a large amount of data and a very strong credit risk skills to be successful,” he said. “There was consensus the number of startups that would become big peer-to-peer winners was going to be in the tens, not in the hundreds or the thousands”.

Mr Serhan, CFA, President CFA Society Sydney and Managing Director, Research Strategy, Asia-Pacific at Morningstar, said the Report focused on what CFA felt it brought to the FinTech table in terms of expertise and insights, namely a global membership organization of investment management professionals.

“Our global industry network is unparalleled and we add value by facilitating a balanced discussion among the major stakeholders. It will be their collective actions, rather than the action of any individual group, that will determine the FinTech industry’s future and its impact on investors and financial services around the world including Australia.”

Mr Serhan noted the objective of the Report was to focus on areas where innovations are likely to disrupt financial institutions including blockchain, robo-adviser, mobile payment and P2P lending and intentionally limited discussion about artificial intelligence, big data and cyber security.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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A U.S. Perspective: Can Canadian Alternative Finance Contend?

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NCFA Canada | John Neal | July 6, 2016

As an intern from the States I have had the pleasure of living in Toronto for the last month while working for NCFA Canada under a study abroad experience. While adapting to Canadian culture is simple, you learn to navigate the subtle differences such as use of metric system, reading temperatures in Celsius, the typical American adjustment.

Canada vs the U.S.

When I think of U.S. Canada relating to each other I think similar lifestyle, similar culture and perhaps similar economic activity just proportionate to each other’s respective size. Yet, while learning about the Crowdfunding industry in Canada compared to the UK and the US there seems to be major disconnect.

For example, the U.S. outweighs Canada in Crowdfunding numbers by $36,000,000,000 to 190,000,000 in 2016. Let’s put this into perspective Canada’s numbers are 0. 00000527% of the United States. That’s 5 one millionth of the U.S.’s numbers (Download:  2016 Alternative Finance in Canada report).

Source: NCFA 2016 Alternative Finance Industry Report

Alternative Finance Crowdfunding and FinTech are common global trends spreading like wildfire internationally but at a much slower pace here in Canada (from what I can see). I’m aware of the innovation in Canada and the willingness to be a catalyst for change. However, in the States there are two cities that champion FinTech, San Francisco (Silicon Valley) and New York. These two global hubs amass for a large portion of the technological innovation within the U.S. To grow Canada’s Alternative Finance sector, there must be some form of change soon of how these portals are regulated.

See:  Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency

In 2015 S.E.C. in the United States adopted rules to permit crowdfunding on a larger scale. Proactive measures have taken place States side, the question remains can Canada essentially foster the innovation that is present South of the border and nurture Alternative Finance to become a viable source of financing for Canadian companies and likewise an opportunity for domestic and global investor?  The power of alternative finance, evolving digital platforms and online digital trends is becoming an authentic form of raising capital.

New forms of finance have been empowered by consumer driven online marketplaces (i.e. Crowdfunding) which has led to the creation of countless new opportunities in the financial sector.” – Cato Pastoll, Co-Founder & CEO of Lending Loop.

U.S. ability to adapt to change

United States crowdfunding has shown promise according to the dollar $ numbers raised, however there are continued measures to fix bugs and strengthen regulatory actions. For instance, the “H.R. 4855 Bill “Fix Crowdfunding Act” passed by the house in the States on July 6th, 2016. We can see that in the U.S. there are continued efforts to alter regulations in favor for efficient crowdfunding. Another significant modification that separates U.S. and Canada is the use of advertising for crowdfunding. In Canada, there are restrictions for crowdfunding advertising and solicitation (Read more here!) while  in the United Sates advertising is allowed for crowdfunding for issuers. Limiting crowdfunding offer distribution channels can be seen as hindering education, and impeding the growth of the Canadian industry.

Funding options for a new generation

I have noticed University students in the States are quickly evolving and many of my colleagues are currently using or thinking about relying on Alternative Finance portals to provide them with adequate capital to take student innovation to launch new businesses to market. Innovation is what drives millennial students at American Universities. Fortunately, the concept of crowdfunding in the States is welcomed, and my fellow peers are benefiting from its rewards while investors are simultaneously gaining access to great new investment opportunities.  I can envision Canada eventually adopting some regulatory changes to encourage market development to ensure Canadian companies have equal access to new financing models. This would be exceptional for business of all kinds, due to simpler Alternative Finance access. Canada deserves to be among the top leaders in Alternative Finance-Crowdfunding and I am confident over time they will.

While the United States and Canada remain strong economic partners, when it comes to crowdfunding there currently remains a massive void for the Canadians. Ultimately, can Canada adopt enough change for alternative finance – crowdfunding to allow it to contend in 2017?  Get our your crystal ball and let me know what you think the results will be??  email:  john@ncfacanada.org

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John Neal, a NCFA Canada Marketing Intern from Michigan State University. John focuses on business/marketing development for NCFA Canada. Increasing awareness for Canadian Crowdfunding Industry by way of online and offline outreach.

 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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CALLING ALL COMPANIES, INVESTORS & FUNDING PLATFORMS! Help Define the Future of Alternative Finance Crowdfunding in Canada

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NCFA Canada (About Us) | June 22, 2017

This is a vital time for the alternative finance crowdfunding sector in Canada.

The crowdfunding sector in Canada offers tremendous potential to innovate and improve capital formation, storage and the distribution of resources by leveraging technology to unlock transactional inefficiencies, provide more liquidity and help small businesses, the backbone of the Canadian economy, to commercialize and globally compete in modern digital times.  While market volumes grew 48% from 2013-2015 and is predicted to reach $190 million in 2016 (download 2016 NCFA report), Canadian markets continue to fall behind international competitors due to market stifling regulations (eg., US $35.2 billion in 2016, Chicago-Booth/Cambridge report).

Your voice is more critical than ever before! 

  • All survey participants will be entered into a draw to receive a $100 gift card of their choice plus $25 Uber promo card for their time.
  • Are you an innovative company raising seed or growth capital? Have you considered raising your next financing in alternative finance markets? What are the most important decision drivers?
  • As a retail or accredited investor, how many deals have you backed in the past 12 months? What’s working and what’s not?

Please take 5min and show support for capital innovation, SME growth and new investment opportunities in alternative finance markets:

  • Your confidential responses will form the basis for NCFAs annual 2017 report to be published later this fall
  • Armed with this data, we seek to promote nationwide growth within the industry and create a persuasive impact on allowing more flexible government regulations and educational support for Alternative Finance Crowdfunding in Canada.  Share your voice now

“We are on the cusp of a new, potentially revolutionary era in consumer and SME finance that harnesses the wisdom of the crowd and its power to effect huge change in the financial sector.”  NCFA Canada

Take the survey now:   http://bit.ly/2perd2N

*Only Open until June 30

We highly appreciate your time and thank for participating in the survey!  Questions?  info@ncfacanada.org.

Sincerely

Craig Asano
Founding Executive Director
NCFA Canada
(416) 618-0254

 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Jason A. Saltzman, Partner, Gowling WLG (Canada) LLP, Joins National Crowdfunding Association of Canada’s Advisory Group

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NCFA Canada | Craig Asano | Jun 21, 2017

Jason Saltzman, Advisor, Securities and Financings

TORONTO, JUN 21, 2017 – The National Crowdfunding Association of Canada (NCFA) today announced that Jason A. Saltzman, Partner at Gowling WLG (Canada) LLP, has joined the Association as Advisor, Securities and Financings.

Jason is a partner in Gowling WLG’s Toronto office practising in corporate finance and securities law, with an emphasis on securities offerings, mergers and acquisitions, private equity and venture capital transactions and regulatory compliance matters.  He assists issuers, investment dealers, investment portals and institutional and private investors on complex equity and debt financing transactions, ranging from start-up investments, venture capital and private equity investments, to larger public offerings and project finance.

Jason has taken numerous companies public on the TSX, TSX Venture Exchange and Canadian Securities Exchange by IPO, reverse takeover, capital pool transactions and direct listings. He also advises securities dealers, advisers, investment fund managers and other market participants in connection with their registration and compliance issues.  Jason served two terms on the Ontario Securities Commission’s Small and Medium Enterprises Committee and has been very active in building an alternative finance practice by focusing on fin-tech, crowdfinance and other disruptive models such as online investment platforms, peer-to-peer lending and robo-advising. He has become known as a thought leader in this innovative area and is working closely with other Gowling WLG professionals as part of a fully-integrated fin tech legal practice group.

 “Crowdfunding is a phenomenon and not a fad. Issuers and securities dealers are already integrating this channel into their overall finance strategy and are using it as a way to better connect and identify with their target markets. The advent of specialized investment platforms, innovative technologies and evolving approaches for the regulation of online investment portals (including new securities law exemptions and OSC's Launch Pad), have set the nascent crowdfunding industry on the right path for the future.” -- Jason Saltzman, Partner, Gowling WLG (Canada) LLP

“Jason not only understands the potential impact of crowdfunding and fintech innovation on alternative finance markets but been a huge supporter of NCFA since the early days.  He’s a leading securities lawyer in the sector with a long list of accolades and deep experience working with registration, compliance and complex financings full stop.  On behalf of the industry we thank Jason for his commitment and continued support, and are thrilled of his participation in the Association’s Advisory group.”  -- Craig Asano, Executive Director, NCFA Canada

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About National Crowdfunding Association of Canada

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. For more information please visit: www.ncfacanada.org.

MEDIA CONTACT:
Craig Asano
casano@ncfacanada.org
416 618 0254

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