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Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt Securities

Crowdfund Insider | | Nov 24, 2020

Sherwood Neiss and Doug Ellenoff - Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt SecuritiesThe exempt securities marketplace can be arcane and challenging to manage for entrepreneurs seeking to raise capital. The advent of online capital formation has helped to democratize access to capital as well as streamline securities offerings but hurdles do remain. A new startup co-founded by several prominent names in the investment crowdfunding industry seeks to facilitate secondary transactions for private securities.

Sherwood “Woodie” Neiss, co-founder of Crowdfund Capital Advisors, Doug Ellenoff, Managing Partner of Manhattan law firm of Ellenoff, Grossman, and Schole, and Jim Dowd, founder and CEO of North Capital Private Securities, have joined to launch GUARDD:  A Fintech designed to support secondary market trading for private company securities, including digital assets/tokens to facilitate compliance with both federal transparency requirements and state blue sky laws.

According to a note from the company, GUARDD enables the necessary disclosure and dissemination of private company information for investors, regulators, and market participants.  This allows issuers to comply with federal and state financial disclosure requirements related to the trading of private company securities in secondary markets, thus addressing a challenge regarding exempt securities that tend to be illiquid. Overall, more liquidity can help price discovery while boosting interest in private securities.

Following the announcement that the platform is now live, Crowdfund Insider contacted Neiss with questions regarding the platform’s operations and his expectations for GUARDD. Our discussion is shared below.


You have been in the securities crowdfunding space for a long time so you understand the sector well. How did the concept for GUARDD emerge?

Woodie Neiss: When the final rules came out for Regulation Crowdfunding (Reg CF) we knew that these securities could be available for secondary transfer after the one-year holding period was up. We also knew for Regulation A+ offerings those securities could be transferred immediately. However, nothing in the rules addressed the obstacles issuers would have to face to be in compliance with state laws that govern the secondary transfer of securities nor pre-empted state laws.

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At that point, a seed was planted but it didn’t sprout until the industry had a chance to evolve and Online Investment Platforms, as well as Alternative Trading Systems (ATSs), started to express interest in facilitating the secondary transfer of securities.

At this point, we knew that it would be incredibly difficult and costly for issuers to tackle the 50 different state laws that govern the secondary transfer of securities. But we also knew the Manual Exemption could be a pathway. It would require getting issuers to provide ongoing disclosures in a National Securities Manual. Such a pathway for private companies didn’t exist. It was then that we decided to embark on developing a Technology solution to enable this.

Effectively, you are making private securities compliant under Blue Sky rules for secondary transactions. How do you accomplish this?

Woodie Neiss: There are very few exemptions under which issuers do not have to register their offerings or resales under state laws. These include non-solicitation and private isolated offers and sales to accredited investors. The only way one can have broad exemption is to publish ongoing company and financial information in what is known as a National Securities Manual. We spent almost 3 years building the technology and solution and socializing it with NASAA and the state regulators.

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GUARDD standardizes private company reporting much like a 10k or a 10q does for a public company. We work with issuers that have performed an audit so that a CPA has verified the integrity of information disclosed. We then take their GUARDD report and audit, run it through our blue sky compliance team, and publish it in a National Securities Manual.

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NCFA Jan 2018 resize - Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt Securities The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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