Oscar Jofre  00:29

Okay, we are all set up well on the app. I made it just in time. Okay, let’s get started. Good morning, everyone. It’s good to see you both. All right. For everyone else. Thank you so much, once again to making it to the KoreSummit webinar series 2021. My name is Oscar Jofre. We have a very interesting discussion this morning that hopefully will enlighten I know I have a few questions today, more than I did before, which stirred things up a bit. You know, the format for us is very interesting. It’s more about kind of a fireside chat discussion with everyone. Get everyone talking and discussing the topic at hand. And then of course, this is being recorded, so everybody can watch it later. So before we get started right into it, I want to give everybody an opportunity to meet panelists. Sure you please. Hi,

Shari Noonan  01:21

I’m Shari Noonan I’m the CEO and co founder of Rialto Markets. Rialto Markets is a FINRA registered broker dealer and alternative trading system or ATS. And we are focused on private markets across all private markets.

Elliot Chun  01:36

But hey, everyone, Elliot Chun here, Managing Director at Weild & Co., a US registered broker dealer. My team Emergents focuses on the intersection of emerging technologies, private companies, and helping with the capital raising and strategic kind of m&a and advisory and capital structuring part of the process here. And for those that a little bit of background on Weild & Co. was founded by David Weild, who among a few different things, including ex President, Prudential securities, Vice Chair of NASDAQ, a lot of his writing became the foundation for the JOBS Act which laid the groundwork for regulation CF, as well as Regulation A plus.

Oscar Jofre  02:32

Nice finally your it’s a nice way to put in David Weild. I like that. Thank you appreciate that. Is it every time you’re on, If you don’t say, you know, I will, you know, I thank you guys for giving me some of those stupid questions. I’m going to start it off with I’ve had three calls today already this morning. And I have not been able to answer this. No matter how many times I hear this, this discussion, and I’m sure others in the that are listening in will. I know it’s one over and over. So I’m going to give each of you an opportunity to please give it to us in the most layman’s terms possible. What is the difference between an exchange and we’re now using the word ATS and secondary market? And are those things different? I’ll start with you, Shari. And then I obviously Elliott, I want to go to you as well.

Shari Noonan  03:23

Absolutely. So the difference between an exchange and an ATS is that an exchange is a their own self regulatory organization. So they create their own self regulatory organization, there is oversight by the SEC, they have members and they have certain policies. So when an exchange for example, wants to change their pricing, or wants to add a new line of business, they actually go to the SEC and request rule changes to their member book into their to their actual policies, but they really are their own sort of standalone regulatory mutation and alternative trading system or in ATS. FINRA is the self regulatory organization that oversees an ATS. In conjunction with the SEC, the SEC does not approve ATSs. But ATSs is file information with the SEC. The SEC is very, very involved with the operation of ATS is and whenever there’s a material change in operation within ATS and 80 s needs to go to FINRA which is their self regulatory organization, as well as the SEC and file the appropriate paperwork, whether that be a Mac, which has the material change. And you know, discuss that with FINRA, as well as after FINRA is comfortable with the change. Then they file paperwork with the SEC in a form eight Yes, which basically explains the change that’s happening to the business but at like the highest level. That’s the difference and I’m happy to take you through that. The sort of history of ATS and how they came about, but that’s the big difference. And Elliot,

Oscar Jofre  05:05

I don’t Yeah, I don’t think the history will be. You’re right. We could be there for will. And we will. Actually, that’s a good one. I’ve never even brought it to that level. That’s good distinction, self-regulatory, ATS, FINRA, and SEC. So let I’m going to put it to you this way. Elliott, from an investor or a company point of view, because that’s who’s asking the question, because to them, they’re, I don’t even know how to, could you provide an insight to that?

Elliot Chun  05:32

We have. So functionally, right. Besides the great explanation that Shari gave functionally, from an A investor who owns a position in a company that is trading either on an exchange or an ATS, functionally it is relatively, there isn’t much difference from a functional perspective, right, as long as the issuer has gone through the correct process, and the ATS has gone through the correct process, as well as the exchange of listing that issuer on their trading platform. And this is part of the beauty of this, functionally, it is not much different. In if you’re owning a position, there isn’t you shouldn’t think of it as different and how you’re are, you are able to use the platform, which we’ll talk about what you’re going to use the platform for. But I like to think of it as, hey, pretty much it’s relatively the same. Now. It’s not under the covers, but from an investor, the broader users of this very, very similar functionally.

Oscar Jofre  06:50

Okay, so it’s similar function, we use different terminology to describe it. We know it’s self regulate, self regulatory, obviously, regulated by the regulator’s themselves. Okay. Well, we’ll dive into a little bit more deeper in the conversation. So now, obviously, we’re talking more about it in more detail today than we were years ago. But now it’s quite in front and center because of regulation. So Regulation A itself, the regulation has this ability to give that liquidity for the investor. And there has to be a venue for it. And that’s what this venue is. So, Shari, if you obviously this is a big day coming forward for all of us coming soon. So walk us through that.

Shari Noonan  07:36

What would you like me to walk you through?

Oscar Jofre  07:39

Oh, sorry, my apologies. What I meant is sorry, obviously, you know, with regulation A, right, it’s for most people, there is the ATF regulation A coming together with the new amendment coming in, in future. Well, what is the impact of all those strange things that are going to happen for secondary market? Yeah, absolutely.

Shari Noonan  08:01

And I mean, this has been really around for a while. But you know, what we’ve been focused on from our ATS is really making the ATS, which is quite different from both exchanges, as well as other ATS is, is making the ATS available, both to the individual investor, so you don’t have to go through another intermediary, another broker dealer or another member, as exchanges would call them members. And then it’s also at we’ve really worked to make the cost the actual price point for the issuers, one that works, because a lot of exchanges, it, the listing fees can be quite substantial. So so that’s really what we’ve worked to do with our ATS, in terms of, you know, what it allows issuers to do, and it is really provide their investors with an off ramp, right, there’s an on ramp where you can buy the security, but there’s no sort of off ramp. So that’s going to open up the group of investors to the issuers, because investors that otherwise wouldn’t have tied their money up indefinitely. now know that there is a there’s a monetization strategy, there’s a monetization component that they can avail themselves of, in terms of the date that’s coming up, you know, the, the increase in the caps, I think, are definitely going to, for specifically reg CF, but even for RegA, will drive more interest from private companies as a capital formation tool. It’s a much it’s a very effective tool to have in their toolkit. And Elliot, I don’t know if there’s anything else you want to add.

Elliot Chun  09:41

Yeah, and I like your description of off ramp. Because that is that’s, that’s very accurate, and it’s a visual one as well. It’s also not the term that Oscar use, which was liquidity and I think we have to be very, very careful anytime we’re talking about this space to differentiate between the two, right, having an off ramp or an ability to sell your position as an investor is one of the biggest benefits to this financial innovation. Even though it’s not necessarily innovation, it certainly is from where we’re talking about in February of 2021. Particularly for private investing the ability to be able to sell your position, or off ramp, your asset or your position did not really exist. Prior to the whole RegA, RegA plus environment. Additionally, as a couple of points that Shari had mentioned, the listing fees, and the fees from an investor perspective, were almost prohibitive, when you take a look at the amount of capital that was being raised, as well as being able to actually provide that ability to off ramp for issuers, investors, it almost became, it was from a pricing and cost perspective, perspective, prohibitive is very difficult to actually make happen. And so, with these innovations that we’re seeing today, we’re actually looking at for almost the first time, a secondary market scenario that makes sense for both the issuer as well as the investor. And I think that’s an important part to highlight during this discussion, is that it needs to work for both parties, and it didn’t previously, and we’re now moving to an area where it does make sense. And so you’re seeing the investor get the benefits that we have been promised for a few years now. And you know, the promise was there. But I would say that the technology to be able to help facilitate that, in conjunction with the regulation environment, just wasn’t there. And the great thing is, is that we’re starting to see both change, and both kind of merge into an area where it is there now.

Oscar Jofre  12:20

And that’s obviously going to be impactful for companies. I haven’t heard off ramp and I just want to make sure I’m clear. So when you use off ramp, I use the word liquidity. And sometimes when I catch myself I where they should be seen a venue, a venue for potential liquidity. That’s really what I’m trying to correct.

Shari Noonan  12:45

That’s correct. I mean, really the big, the big misnomer, I think that that’s been thrown around previously is it can be difficult because you can say liquidity, I mean different things. But what we don’t want there to be a misconception about is, just because there is an issue where that is on the real toe platform, that does not mean that it’s going to be an actively traded issue. Because these just are not supposed to be they’re not meant to be actively traded issues, they’re private market securities with market caps of, you know, 10 million to $100 million. The beauty is that we are providing issuers and investors with the capability to now invest in these types of securities, and monetize their investment. That does not mean that it’s going to be trading like IBM, because it’s not IBM, it’s not an index. It’s not, you know, so so we just need to be very careful about what we’ve done, what we’ve done is reduce the friction associated with issuers being able to provide this capability to their investors and investors to be able to actually monetize their investment.

Elliot Chun  14:00

And I know we take it a step further, Oscar, we, I mean, I, I basically have struck the word from my vocabulary from, I think my compliance with Word, which were liquidity, liquidity and talking about private markets. It’s in because, as Shari mentioned, it’s a misnomer, right in it, the word means it feels there’s a lot of volume, it’s easy to get in and out active trading market. But that’s well said. It’s not what this was intended to be. It’s not intended to be a liquid market. It’s intended to be a function of allowing for someone an investor to sell their position or off ramp. And it’s a big it’s a different distinction, but it’s important and as you think about more and more of the regulatory landscape, we have to be the industry in To make sure that they’re not misconstruing what this function is supposed to be for, and it’s not supposed to be liquid, it’s just supposed to provide an opportunity to sell your position if you would like, which is a massive benefit for private investors. When you think about the typical private investing landscape, you’re, you’re usually locked up for likely 10 years and your investment just on average, right, you would say it’s a 10 year lockup in a private investment. Sometimes it’s less than that. Sometimes it’s more, that is very challenging, because if an investor has something happen in that 10 year time period, they don’t have access to that capital. And things a lot of things gonna happen in 10 years. So it was prohibitive, because only typically, the larger and professional investing organizations into private companies had the wherewithal to be able to say, yeah, I’m confident enough to lock in this amount of capital for this amount of time. And so for individuals, accredited investors who were individuals, it was much more difficult to be able to commit, even though the returns could be substantial in private markets, it was very difficult to commit to that amount of time and an inflexible structure in order to get access to one’s capital. And this is where the secondary market ATS innovation is, is a game changer.

Oscar Jofre  16:50

So here, here’s a question I have for you. So after my last webinar, we had about secondary market, I decided to go and do a number of providers, not providers, those who are providing the service. So I have it, maybe two part, I found the word liquidity, the constant terminology being used. And I hear what you’re saying, I do I understand it. And I also see how they’re selling it. And I understand the confusion. Look, we haven’t even got to the next part, which is separating the different types of ATS. So it’s like, but, you know, I know the industry uses words like off ramp, but the investor themselves, they don’t understand that language is the lingo that we use, like KYC gateway, like we use internal. So is the industry. I get it, why they’re using it. I am, I’m always careful to say that it’s a venue, venue, meaning that you can place a bid for your securities, it’s going to take time for that to develop. But let’s hypothetically say it does develop. And not to say that it’s not an IBM, but there is a bit of a sparkplug. I mean, they’re there as one particular secondary market already, that’s indicating the level of interest that happened in one day was in the billions. And so I respect the fact that we’re not going to use it. But is that a regulatory issue? Or is it just the

Shari Noonan  18:27

Yeah, I’m really happy to talk about this. It’s an economic issue. We could we could have market makers, not market makers, but liquidity providers, because we are in ATS, not an exchange. So excuse my terminology. But we could have liquidity providers that stand there and provide a two sided quote, that the question is, what’s the cost? Nothing’s free. What’s the cost associated with that? And is it economically feasible for an issuer that has 10 million outstanding 50 million outstanding to pay and whatever way that that that those economics transfer because there are lots of rules and lots of regulations around this? But does it make economic sense? And is it practical? And is it needed? Or is it is so you know, we think about liquidity provisioning all the time. All the time, we’re constantly thinking about what do we need to build to make investors and make issuers make investors comfortable in terms of their investment and the price discovery around their investment. So things like research, we talked about research all the time, things like other cool, quantitative information to provide investors to give them a very, to give them the comfort that they understand the price discovery around their holdings, so that you can make an educated decision when they’re looking to liquidate what is important to realize is, you know, over the next year, to really 18 months, I believe that there will be a lot of liquidity provisioning protocols that will, that will come out to the market. And it will be everything from, you know, call auctions that like we have to real time systems, which we’re we’re working on something like that right now, to liquidity providers standing there on both sides of the of the quote, which is possible, it’s just it’s important for everyone to realize that’s not a free service, that that costs something, and so someone’s going to pay in the ecosystem, it might be the issue, or it might be the investor, but someone will pay for that service. So you know, it’s important to realize that, that we’re building this, this market and this ecosystem. And so, you know, to not lose sight of the fact of the economics behind all of this.

Elliot Chun  21:07

And, and to add to that, when you look at the current infrastructure for publicly traded equities, you’re looking at 130 years of financial innovation to get to where we are in 2021.

Oscar Jofre  21:23

We can do it in 12 months.

Elliot Chun  21:27

So we have to be realistic because there’s going to be a lot of services that are required research, certainly one market making slash liquidity providers, certainly another other ancillary services that can help the investor navigate the process. So certainly education is a big piece. I love hearing about potential protocols that can come in and really help with this. That is very much a 2021 tool that is being used to solve a 2021 problem. I love hearing that. And what I mean by that is that look, this, that tool doesn’t necessarily exist in our world today with a liquidity provision protocol is something that is very, very new. The advantages is that we have tools now, blockchain being one of them, that can allow for these innovations to really develop properly, and then be implemented in an institutional way, while still addressing a generally retail market. But I agree 100%, with Shari, in that there needs to be other ancillary services to support the after market issuance of these private investments. And we’re not there yet. That’s one of those things where we’re just not there yet today. But and we have to figure out the economic piece, again, to Shari’s point, because it needs to make sense. And I think, a lot of misnomer in the way public equities operates today, you see a Oh, my God, a robin hood, they’re not charging any commissions. Oh, but by the way, it’s paid for order flow, which people own Oh, so they’re not giving it away for free. No, they’re not giving it away for free, they’re getting compensated a significant amount of money. That’s why their valuation is so high. So the private markets RegA plus secondary market trading function does need to figure out its economic models, incentive models to make sure that everyone’s properly aligned in the process to facilitate a well functioning, buying and selling because I think buying part we’ve been talking about the selling of position, I think the buying is going to be as interesting going forward as more and more people are comfortable with what this market looks like. We’re gonna have a fantastic number of people that are didn’t get in and the primary issuance but maybe their users of the product or consumers of the service. And now they’re saying, well, I can’t your option previously was, hey, you don’t have any chance of buying into that position. You have to wait for the IPO, which is the exit strategy of the 50 other institutions and stages before now you’re going to have an opportunity as an individual to potentially buy in some buy into some of these in a secondary market. That’s fantastic. That part is fantastic. But we need a little bit more infrastructure around it. We need a little more innovation to help us get there.

Oscar Jofre  25:00

That’s an interesting point, I wonder if the same dynamic that changed in the way primary capital is raised. Meaning, if I describe it was, I would go to my broker dealer, they would be the front person to selling, they would make a judgment call on me, rather than being given me an opportunity to present myself in front of the investor. The reason I followed this path 11 years ago was, I don’t want that middleman to tell me any more whether my deal is good anymore. Or as Andrew Coyne often says, I’d rather have 3000 people that tell me, they love it. So I’m gonna take that model and bring it to secondary. Because one thing about secondary market, you touched on it a bit. Shari, was that you made a distinction, the type of secondary market you’re bringing into the market, but I think I want to touch on the two different types. And the reason I’m going to touch on that is because, look, I’m gonna call it the way it is. The professionals don’t get it, right. That’s the bottom line. And I’m not an advocate, I do believe they should be there. But people are smart enough, they’re making their decisions on their own, the momentum is going forward. There’s still a broker dealer involved, you’re facilitating, but the individual made that buying decision on their own, the same way they’re going to make the selling. But I’m that distinction, I think it’s going to matter, because right now, they make that purchase. And depending on the type of ATS, you go to, that power gets taken away from you. Because now, other issues get in the way, people’s, you know, I don’t like the sector, I don’t think it’s worth that much. Can you? Do you understand the question I’m asking because,

Shari Noonan  26:47

yeah, so so you know, we there are regulations from a broker dealer perspective. So how we approach this is we’re really building the infrastructure, we’re building the rails. But we are not in the advising business, we’re not in the advisory business, we’re not an investment bank. We’re not a registered investment advisor. So really, you know, we obligations as a broker dealer to perform your suitability. But that’s, that’s really under reg BI. And you know, you need to have suitability to make sure that you understand that you’re, the investors understand that they can lose their money, and that everyone’s on the same page around this particular investment or investment set. But then if after that point, we allow the investor to invest as they would like, now, we won’t let them to allow, we won’t allow them to invest, you know, 10 times their net worth, but we will allow them to make an investment. And that’s where I really think the future to your point is going where, you know, people are really going to take control of their financial futures. And they’re going to want direct access to investments that they previously have not had the ability to directly access. So the way that we work is we interact directly with the investor and allow them to, you know, select those investments and participate in those investments. Whereas, you know, there may be the other model I think you were alluding to, which is, if you want an investment, you need to call your broker dealer, who will then invest in the investment invest in that security on your behalf.

Oscar Jofre  28:28

Well, no, not necessarily that way. Because I’m not picking on you, Elliott, but thank you for bringing it up. Because located one thing that I’ve understood, I’m not here to remove the logo of compliance and all that and I think from the outside, it can provide great guidance. But not everybody’s like you Eliot will, you’ll have an open mind. I have met broker dealers that have a bias towards certain things, like my noise you know, somebody of color, because it’s a female CEO, oh, my God, they don’t have a clue. That bias it to me, whatever layer comes in, or Oh, you’re too small, you’re you only make a million or are you you’re near so that you come from the west, oh, you’re a California, whatever those biases are, they’re removed here. But nevertheless, it’s still not regulated. So that’s why I think it’s going to change we don’t have the data yet agree. But we do see the momentum. So with the momentum is, so the statistic is right now guys, here’s what we do know now. So in the total lifespan of regulation CF, there have been over 1 million non accredited investors participated in investing and RegA, you know, very soon we’re gonna have that information as well. And I would say that that number is at least three times or four times greater, which is good, which means these people make their decisions without the bias opinion just based on their own which should trickle The to the other side element, which is very interesting. But fundamentally, I do want to speak of that just for clarity. There are two different types of ATS is, even though the other one can say we deal with the retail investor, the investor themselves personally, Elliot Chung cannot go to certain ATSs in places or he has to go through a BD. And that’s the that’s one but your platform I’m going directly

Shari Noonan  30:33

that’s directly just in and to be even more pedantic. An ATSs is also a broker dealer. So so all he says are broker dealers, not all broker dealers are ATSs. So when you go to an APS, by definition, that is also a broker dealer, because our self regulatory organization has been wrong. And, and so we are a broker dealer, however, there are ATSs, that, you know, within the confines of their own network, they restrict the ability for retail users to interact, they require that all orders go through another broker dealer, a broker dealer to come into their network.

Elliot Chun  31:18

And, you know, my comment is, we need as the infrastructure is being built, we need optionality, right? Because, yes, we need some, there’s going to be some where maybe I don’t want to call them less sophisticated. But there’s going to be issues or scenarios where someone comes in and wants somebody that is either completely hand holding, I don’t want to deal with any of the I just want to tell somebody, I want to buy that company, because I use that product. And I saw it online, right? I got an email from that person, like you take care of it right, there’s going to be that option. And there’s going to be the other option of Oh, I can do I’m going to go and do that myself. We need and there’s probably going to be other use cases of interested investors that are going to want to engage in the environment. And maybe there’s another method for them knows, innovation is moving quickly. So there’s absolutely a space for both. We’ll see which one the market ends up taking. I I definitely am a believer of the more self directed type of behavior. I think it’s important, but the problem there is there’s a big education curve. And then there’s a there’s an awareness curve. Then there’s the education like Oh, right, what is RegA? Right, what is reg CF. So I think generally speaking, most people know that education wise, there’s a big gap, right. But you had mentioned there is a million unaccredited investors, Oscar, but you love throwing out the number in the US, there’s 230 million people out here, I know, we got a long way

Oscar Jofre  33:10

to go, we do we do without,

Elliot Chun  33:13

once you get that education, then it’s the training side. And then you have the implementation. So we got a few other phases to get through. And the more options that we’re able to the industry is able to provide in a regulated and compliant way, I think is helpful for all of us. And as we start getting more and more metrics, and we start understanding the profile of the person that is engaging in these markets, then we can certainly help curate and customize specifically for those groups. So and

Shari Noonan  33:50

I think your exact point, you know, if you think of like the innovators dilemma, the curve of the really early adopters, that’s the million reg CF investors, right? They’re the folks who want to open up the box and put it together themselves. But most people, the mainstream don’t want to open up the box and put it together themselves, they’re going to either want to go through their IRA account or their RIA or something else. So really having the flexibility to have individuals go direct. The folks who want to do it themselves, as well as plugging in networks, right is going to be really key. And I think that that’s just going to be an evolution of this space. And there are going to be a lot of winners, a lot of different venues that are going to be developing in very different ways. Much like the equities market structure developed in very different ways. There were different types of venues that popped up and, and they serve different use cases.

Oscar Jofre  34:51

Agreed and we’re ready starting to kind of get that you know, this was once again, you know, it’s good to point out we’re just scratching so we’re just getting started. And you know how I feel about education. I’m up. I’m an advocate of it, I think the only way we will ever reach that goal over here is if we constantly educate. And we’re going to need to repeat this over and over again. But I want to spend the next part of the discussion today is that it is here. So let’s do hypothetically we are at the education, training, and implementation phase, we don’t have the other parts, but it will come. So now we and company ABC, I’m ready to go I get a RegA offering, or I’m doing one. What do I need to do next? Now, from a company, we’ve talked about the investor and all that, but before the investor can come? So the selling shareholder sorry, the seller, to offer him the offer? They need to come to you. So can you walk us through that things first?

Shari Noonan  35:53

Absolutely. So issuers come to us. And, you know, we work with a lot of people who help introduce issuers to us who are familiar with our product. And we will talk to them about what we offer and the different protocols that are available, whether they would like to, you know, handle it just monthly or quarterly or daily. And you know, in terms of monetization opportunities for their investors, and then from there, we have an application process, they work with our onboarding team, go through exactly what they would have gone through from KYC AML. And, you know, we work in two different capacities, we work on primary offerings as the broker of record, and also then on the secondary. So if initially uses as the primary broker of record, then that flows a little bit easier. But it’s not necessary, we work with other broker dealers, who will then take their issuers and bring them onto our platform. There are listing criteria, placement criteria, and then it takes about six, six weeks to actually get the issue on the platform. So if you’re doing a raise, sometimes it makes sense to do it at the same time so that it’s available once the raise is complete, we do not we will help securities during a raise so that you’re not so issuers aren’t competing with themselves.

Oscar Jofre  37:15

It is one thing that Ellie, you brought up a few times about secondary and if you can elaborate on it is that during the time that someone’s doing a capital race, sometimes we need to say no to certain investors, not because we don’t want them. But this wear plays out for the secondary, right? It’s also the next coupling to it. What role does, would your firm play in this onboarding ramp to the ATSs, if you were you know, the primary BD for the RegA offering that you’re working?

Elliot Chun  37:49

Yeah. So a lot of the, again, the infrastructure that is being built now. There are options. And it’s important to consider what those options are, and what’s best for you as an issuer, and what’s best for your future or current investors. And so going, understanding what those issues are important for that issuer. And then analyzing what products are in the market that can help fulfill those requirements is very important because it in, especially today, it’s not like you are going to select multiple ATS is off the bat, it doesn’t make sense financially for people to do that. Maybe if it doesn’t make sense today. So it’s important to be able to consider, hey, what’s out there, right? And so, you know, we have a very objective technology and service provider objective, meaning we don’t have we know groups in the space, we are when we constantly are making recommendations based upon that group. But that rank recommendation is based on what’s best from what we consider for that particular issue. And it’s important to be able to have that objectivity. Because look, the environment is changing quickly. And the functionality is changing quickly as well. I would never expect an issuer to say, Oh, this group is doing that, that one’s doing that this is on their roadmap, and we want that functionality. So you know, I’m gonna choose that one that’s just unrealistic. There’s already so much an issuer has to deal with. So that that I think is the important part we would play in the process in that kind of objective evaluation of what they need, and then which groups out there can help fulfill those needs.

Oscar Jofre  39:55

And, okay, so we’ve selected the ATS, I think you went through the Brompton But the company is not done yet. I mean, one thing is saying I want my securities to be listed, sorry to be placed, not listed place on a secondary ATS, the company’s not done. There’s still some other regulatory items we have blue sky to deal with, because these are private exemptions. And then we also have securities matter. I know you’re laughing, because this is this, you know, it’s amazing how many times I could hear Oh, it’s so easy. Just come to us, we can listen to you. And nobody, I even asked her. What about blue sky? Oh, no, you don’t need to worry about anything. There’s no blue sky here.

Shari Noonan  40:38

Shari, please. So I’m laughing because, you know, I was just looking at the Office of Small Business. capitalization, the presentation that they made to this is of the SEC, this is a committee within the SEC, and one of their slides that our rules are too complex period. And they have this great graph that shows all the different private securities and all the different exemptions. And, and you know, how you need to comply. And it is just terrifying. It’s, I’m looking at it right now, it’s a terrifying slide. But that’s, you know, part of the issue around the private markets. And why there’s no infrastructure that’s been built is because it’s very, very complicated. And one of our jobs as an HTS is to make sure that as issuers come to us, they’re aware that they have, you know, that their obligations, and we can assist them with those obligations. But there are, you know, blue sky requirements, and there are registrations that come along with that. And so we will work with issuers and will not allow issuers to come onto the platform unless they have completed these things. Now, we can either work with a law firm to do that, but we cover all of that we cover all of those responsibilities. And I think it’s incumbent upon any issue or to just make sure that those are being covered, and that the platform they’re working with isn’t pushing that responsibility off to them without educating them. Because, you know, it’s complicated. And if you’re an issuer in this, is it your business, you wouldn’t know that you’ve had this requirement?

Elliot Chun  42:26

And with issuers are, is this their business? Right? I mean, very, very, very few, which is absolutely intimidating. And, quite frankly, when you think about things that can keep you up at night, this should be one. But if you’ve partnered with the right groups, it shouldn’t be one. But look, for anyone that’s going through this process, as an issuer, you are putting yourselves on the line when you are raising capital in a RegA Plus, I mean, literally, as you’re putting yourself on the line, because if something goes wrong, which we all know things constantly do. You’re the one that has to answer to a group like the SEC, and nobody wants to do that without the right team around them to say, this is what happened. This is how we got into this. And this is what we plan to fix. you’re rolling on that on your own and you are not involved in the securities world. It’s terrifying. And it should be. It should be terrifying, because

Oscar Jofre  43:37

I’m terrified. I’ll terrify you some more. I want to terrify you some more. You’re ready. It’s even lawyers who are given the advice. Well, that’s a Shari and I discovered there are only a few lawyers that really know this. And Elliot, I feel I concur with you. But I actually just had a challenging conversation with a party telling me that their lawyer, I said, Listen, I’ll get the look and the lawyers eminent that they do not need to do this. And I said okay, your call. I’m happy to make an introduction to Sara Hanks. And, and so you could hear it forget me. I’m not a lawyer. I do see it already out there. It’s already happening. I didn’t realize how much it was happening. Because some lawyers are telling clients Oh, hey, listen, you know what, just build an intranet. Build a Craigslist here and you know, you don’t need to worry about anything else.

Shari Noonan  44:35

Yeah we have a number of issuers that have come to us and have not completed the requisite paperwork, that’s, that’s required. And they came from other platforms. And so it was quite shocking for us to see that because we understand the process in one way. So we’ll Go back and get them up to the required paperwork. But it’s just absolutely critical. Because at the end of the day, it comes back to the issuer to Elliott’s point. It’s the issuers responsibility. And I know, people are going to be frustrated, because they’re going to say, but I paid this platform, I paid this lawyer, I paid this person. And, you know, we’re so early in the game, that I think it’s just a combination of people not really understanding the details, and perhaps not giving the best advice. But that’s really not a big consolation when you get a call from the SEC.

Oscar Jofre  45:43

No, it shouldn’t be a surprise, because we’re already seeing some of the issues on the primary. But you’re right. I mean, look, coming back to what you said before earlier, education, education. So now we know we need to educate the industry itself, before it can start putting it out there. So it is important to clarity and blame and component to it, adding the layman to the regulatory side of it, which is, you know, to recap your words, at a secondary market, you still need to adhere to blue sky, which is a word that means that you have to fall in 50 different states, and then you need to fall in what is called the securities manual. And that’s not just a book. Okay. But the No, I’m serious. I actually,

Elliot Chun  46:28

just one final point for me on that is we’re talking about new things that are we’re talking about a date in less than three weeks that is big for the industry, right? And when you have these kind of new innovations, you’re going to have groups that are making not the best choices. And in we’ve seen it in a couple of other iterations, particularly in digital assets and crypto asset markets were groups that it may have seemed like a good idea at the time. And they may have skipped a couple of steps. But you look back and you’re like, oh, man, you’re, you’re basically banned from the industry because of the activities that you did. And so it, it’s not, I’m not saying it’s the industry’s fault, because you’re always going to have groups that are seeking to say, here’s a new innovation, we can bring people in, let’s do it. And I’m not saying that they’re doing it in a nefarious way. But I am saying that there are going to be mistakes making. And as this market grows, the regulator’s because it’s their responsibility, are going to want to go back in time and go find people that didn’t do it the right way. Make them the quote, unquote, poster people. And that can be something that happens 235 years down the line, if you haven’t done it the right way up front, which is it’s tough. It’s frustrating. But that’s just the nature of securities regulation. And so, you know, while we’re talking about this particular topic, it’s just important to, you know, if you have to slow it down, or if you have to say, Hey, we need to assess other groups. It’s worth doing it because again, will reiterate it for any issuer, you’re on the line, right, it is you that is on the line, it’s your responsibility. And it’s not an excuse to say I trusted that group or I didn’t know this is not my business. So just a word of caution as we go through the new role. No, I

Oscar Jofre  48:41

agree. I think it needs to, obviously, we don’t want to make webinars, this warning statement. But I think for ATS, we have to do it, we get it when primary capital racing, we still have to do it over again. And again, remind people what you can and cannot do. But for ATSs Elliott, I concur with you right now. For all of those that are listening in or may watch it later. Make no mistake, the SEC is paying attention. sec is not like other regulators, to your point. They love to wait for you to keep doing it. And for you to profit from it. Because all you’re really doing is making their case and other regulators. I’ll stop you right at the beginning say don’t do that. But this one will wait. And if you’re not talking to the right people, it can be very harmful for everyone involved, including the people who invested in your company who really, you know, their interest was really to make it a go. So, obviously, you know, we’re less touching to the March the 15th. It’s gonna change all of this. What do you see for yourself, Shari? I mean, you’re, you’re both a broker dealer, of course, for RegA, a registered ATS for allowing the everyday investors to come in. How’s that impact you coming the 15th? And then going forward?

Shari Noonan  50:04

Yeah, absolutely. So the 15 things going forward, we’re seeing a lot more demand of people coming in and looking to avail themselves of service increase caps. And we’re also seeing interest. I mean, you know, even though we do allow the everyday investor to come in, we’re seeing interest from broker dealers and others who want to come in and participate in the ATS, which is great, because it just provides a larger diversity of participants in the network.

Elliot Chun  50:33

And you know, that larger diversity is vital, you know, we, we need, the industry needs more great use cases and stories to be able to point to, to show what we in the industry know, is a fantastic innovation here that we have. And the increase in caps is going to lead to a, in my opinion, in the next five to 10 years a waterfall, a wall of new innovators and entrepreneurs that now have an ability to access capital when they did not have that before, in a way that is beneficial to an investor. So it benefits the issuers and also benefits the investors and there aren’t that many financial innovations that can do both. And so the biggest challenge with 1 million in reg crowdfunding was that you can’t do much with a million. With five you can, you can launch almost any business if you can properly access, 5 million in early stage capital. And then when you move to RegA, plus, it’s a natural evolution because you’ve now graduated, and now you can access 75, the 50 to 75 isn’t as important, but what is interesting is that you have an ability to raise after a period of time one year, right. So if we think about where IPOs are, that being kind of the exit strategy for many of the private investors that got in early, and that currently being institutional funds, and you know, family offices that have access to this stuff, the private, this is allowing broader access to more and more people. And we’re doing it in a way where now they don’t have to be locked up. And so with, with this March 15 announcement, we’re gonna see, Shari had mentioned a diversity of issuers, we’re gonna see a lot of better issuers come into the space, we’re going to see them naturally graduate to the RegA plus environment. And that’s going to attract, again, what Jerry had said, the economic part of this business, which is going to support the support this, this capital formation and capital movement throughout the system. And so this is, this is probably one of the bigger announcements that the industry has had, maybe an adjustment to the accredited investor, could be more impactful. But besides that, this is as big as it gets. And we think that you know, this next run that we’re gonna see here is going to be very substantial for the markets.

Oscar Jofre  53:40

No, I agree. And just to be clear, the announcement has already been made. It goes live on the 15th. Sir, we just want to make sure that everybody knows we go live with it. And I know you touched on the accredited Boy, that’s a discussion in itself, because the credit is now are being allowed to participate with. So they’re going to love this, no more going through accreditation, and they can invest with, you know, unlimited limits. So, which is pretty exciting. We do see institutional money coming in. We’ve now had our first RegA deal. We’re institutional money came in. So I think there are these little new things, but like anything else, it’s an ecosystem. You had a starting point, a regulation that allowed, as you said, broader access, no lockup, but now you got to put all the pieces in place and infrastructure to be able to facilitate that regulation. And that’s the part that I don’t think people truly get. Sometimes it’s easy to put it out there and say, Oh, yeah, but then you got to make it work. You got to put it all together. So it can be because one thing is saying I want to trade something for half a million. Well how about trading something for 100 bucks. Right? It’s the big one and I am personally looking forward to it going live. On the 15th of March, I do agree with both of you, it’s a new type of company coming in new type of investors that will see and harmonize to the broader audience. This is not going to change the whole philosophy behind the JOBS Act of how people make the emotional connection to companies, you can still do with the institution. And obviously, they’ll have a different view on it. But it doesn’t change the fact that it is getting broader. And I am looking forward to the next discussion on this subject matter where I think we’ll need to recap again, the education, what are the differences, how people get onboarded, and how it works. But we’ll be able to provide, to, to Elliott’s point, some reporting element of where the buying and the selling is coming from, will it be the same as it’s happening in primer, now, I’m going to make a bet, I’m going to make a prediction here, I’m going to stick my neck out, I have no experience in secondary market whatsoever. But I’m going to say, the same audience that’s participating here, it’s going to be the same audience looking for it again. So and the reason I say that is because I have an issue right now. That was given the advice by counsel, that they could build an intranet, without the filings and all that they’re putting into it. They do it once a month, they allow current holders to sell it to other holders. And it’s constant, constant. And so what that means is that the value proposition is still emotional within that same group. So it will be it will be very exciting. For me, I, it hopefully doesn’t become too technical in nature, but it will be at the beginning just to get some flushed out. So last minute comments shirt from you what, you know, we’re at the starting point, well, we’re getting close to the starting point, right? The launch pad,

Shari Noonan  57:00

that’s I mean, really 2020 for us was all of the infrastructure, if you will, it was getting the regulatory approvals, it was building out the technology, it was connecting into all the different required interfaces. 2021 is really go time. It’s, you know, all of the issuers, it’s getting issuers on and it’s adding value added services, like price discovery mechanisms, and other protocols. And then 22 and beyond, I’m really excited for I think this is just the beginning.

Oscar Jofre  57:34

Elliot, you’re closing on?

Elliot Chun  57:36

Yeah, this is, it’s a great innovation. But just like any innovation, we’re gonna have some bumps, and then we’re going to have some adjustments and some approved improvements. I think it’s important for those that are entering to space to realize that, and there’s going to be some, there’s going to be some zeros out there, right, there’s going to be some great success stories. But I think we also need to be conscious that there are, there’s gonna be some, some not so great success stories as well. And it’s important to be able to say, it’s part of the learning process and the people that are driving innovation forward from an infrastructure such as you and Shari, we’re doing it with the best intentions. And that as we continue, it’s going to be an evolution. So we’re, we’re continuing to evolve, there’s going to be more and more opportunity to involve with it. But this is probably one of the best financial innovations that the industry has put together to date and we’re happy to be a part of it.

Oscar Jofre  58:44

That’s great. Well, here’s the last word, we’ll give it to David we’ll because whenever I have coffee with him, he says that one thing that 2020 did for everyone, and with the amendment is momentum. And the thing about momentum, it forces it doesn’t force it, but there is constant change and to your point bumps, change blow ups are going to happen. But the momentum has started. So with that in mind, thank you, everyone, Shari as always, Elliot, not a dull moment with you, my man. Like No, listen, I know, look,  sometimes I got in my head what I want to go with but you know, during the day, I have meetings with people and they asked me questions. And I absorbed things very quickly. And thanks to both of you. I learned a lot, I take a lot of notes. I’m one of those. I listen, I take notes, and then I repeat it. And one of the things that I’m trying to do is demystify where people think it is. And so I bring that to here because I find that that is the easiest way that I can give them hey, you want to know what it is. Here it is watching us give, give your listen to it and you will have a better understanding. So thank you both for that for everyone else. Have a great afternoon. Great week. We’ll see you in the Afternoon. We have a great March lineup. I’m gonna let everybody know right now on March the 15th. That’s right March 15 16th 17th 18th and 19th. Monday to Friday. We will have a slew of two to three webinars a day, but it starting with David Weil, Sarah Hanks, and Vinson millenary. Starting off with the JOBS Act, State of the Union, kind of chit chat fireside chat. We’re really excited about this. This is a great day for all of us, Eliot, Shari. Have a great day.