Oscar Jofre  00:01

Well, good afternoon, and welcome back. Thank you so much everyone I am. Wow, I first I just want to say thank you for everyone who’s still here listening in and taking all of this in from all these amazing speakers. Part of our KoreConX KorePartner ecosystem. So now we’re here with the FINRA broker dealers. And so for all of you, no, no, no, they’re the [uncertain]. No, no, no, these are the people. So the lawyers make your dream come true, keeping you compliant. These are the people that make sure you’re fully compliant when you’re doing your offering, whether it’s Reg, D, Reg, CF, and Reg A. And you really need to listen, because the game is not the same as it was five years ago, or even a year ago. We have a very different commissioner on board. So here you go by listening to the top FINRA broker dealers in the sector, and it’s going to be led off by our friend, Douglas Ruark. Douglas, the floor is yours. And it looks like he needs to come back. I’ll get Carolina. She’s gonna bring them back. So as she’s bringing them back, let’s start with the introductions. First, Shari, please.

Shari Noonan  01:13

Thank you so much, Oscar excited to be here. So I’m Shari Noonan. I think Douglas actually just came back in. So I’m going to hand it over to Douglas. Douglas, why don’t you then start moderating and then we can move into introductions, we had just kicked off introductions.

Douglas Ruark  01:29

Absolutely. Well, thank you very much Oscar for the opportunity. And my name is Doug Ruark. I’m president of Regulation D resources. And we are a 22 year old firm that specializes in the preparation of securities offerings. And we also function as a, what I would call a quarterback in getting people through the process of executing Regulation D, regulation CF, and Regulation A plus offerings. And, you know, one of the key components to doing a securities offering and especially a modern securities offering, where you’re generally soliciting out into the public, is making sure that you’ve got broker dealers on board to make sure that these offerings are administered properly. And so that that’s really going to be the function of this segment is talking about the role of broker dealers in this process. What are the functions? What are the advantages of having a broker dealer on obviously, in certain programs like reg CF, it’s a requirement. So so that’s really what the focus is going to be, is getting people to understand the role of the broker dealer? What are the functions? What are the advantages, because it is a really key component to this entire process. And then I also think, getting people to understand the differences as well. one of the things that I’ve found is that a lot of times people don’t necessarily understand the difference between a broker dealer acting as an in an administrative fashion versus a retail fashion. And so we can also get some some color on that as far as the the differences there as far as the role of the broker dealer in a particular securities offering. But let’s go ahead and get these introductions started off and on my screen. We’ll we’ll start at the top. Etann please introduce yourself and your firm.

Etan Butler  03:20

Sure, thanks. Etan Butler. Here. I’m the chairman at Dalmore Group. We are a FINRA broker dealer, headquartered in New York. We were founded in 2005. And today, we specialize in helping companies raise capital online at scale. Through regulations D, A and CF. We’ve been fortunate over the last two years to have on boarded over 180 Reg A offerings in a quickly growing number of reg CF offerings, many of which have reached the maximum offering amount. And we always look to share what we’ve, what we’ve seen work well and not so well with our new clients.

Douglas Ruark  04:03

Fantastic. And I’ll then go to Shari. Shari, please introduce yourself and your firm.

Shari Noonan  04:10

Absolutely. Thank you so much, Doug. So my name is Shari Noonan. I’m the CEO and co founder of Rialto Markets where a FINRA registered broker dealer across all 50 states that empowers companies in their private markets, capital raises via self hosted solutions and institutional investor networks across all private markets. So Regulation D CF, and A. We also operate an SEC recognized alternative trading system for secondary trading across private markets.

Douglas Ruark  04:37

Fantastic, Paul, please introduce yourself in your firm.

Paul Karrlsson-Willis  04:42

Yes, I’m so Paul Karrlsson-Willis, CEO of Justly Markets. We are fairly new to this space. We are owned by a NASDAQ listed company called Ideanomics. Who were were Just over a billion dollars currently, who have gone through the private equity, fundraising. And actually a lot of their business that they’re building in the V space is actually again in private equity. So it’s in our DNA. We have brought that to a fundraising raising platform that is CF, Reg A and Reg D. And the experience that we’re bringing in from the senior team is across the full brokerage gambit. So we’re looking at being able to offer DD, as well as high level compliance, as well as global access both to global deals as well as global investors.

Douglas Ruark  05:46

Fantastic. Richard, please introduce yourself in your firm.

Richard Luftig  05:51

Sure. Hi, I’m Richard Luftig, I’m a managing partner at Castle Placement, we were formed in 2900 licensed broker dealer, we have raised billions of dollars of private equity and debt capital for our clients. We just started getting active in equity crowdfunding, beginning of this year, and we’ve gotten quite active and plan to continue to do so.

Douglas Ruark  06:23

Fantastic. Alright, so let’s, let’s start. Etan I’m gonna pitch this question to you, you know, so for Red CF offerings, you know, you’re either executing that type of offering on an SEC approved crowdfunding platform, or you’re executing it with a FINRA broker dealer that’s administering it, and Reg A. Right, that’s really the one that requires it, Reg D, and Reg A Plus, you’re not required to have a broker dealer on board, although most most people that you know, have are in the industry would obviously tell you that, especially with Reg A, plus, you’re going to want a broker dealer on board. Let’s talk about the general role of a broker dealer. And let’s go ahead and we’ll we’ll maybe use Reg A plus as an example. But obviously, it kind of, you know, works across the spectrum. So I’m an issuer I’m getting ready to execute a securities offering. And ultimately, what why would I need a broker dealer on board and I say, need, let’s go ahead. And we’ll use it for a Reg A standpoint, where maybe it’s not required, what would be the function of the broker dealer in that standpoint, and from an administrative standpoint, and then I want to then step into talking about obviously, the differences between that and then operating in a retail standpoint.

Etan Butler  07:33

Yeah, so you don’t need a broker dealer involved for a Reg A, Reg A could be an issuer directed offering. Most people choose to work with a broker dealer first, because it’s, it’s a more efficient way to offer your securities in all 50 States provided that the broker dealer is is registered and licensed in all 50 states. Many people also choose to work with the broker dealer to conduct their offering through a regulated entity. And there’s a number of benefits to doing so. But the BDS role includes due diligence on the issuer, on the on the on the issuing company, on the officers and directors, as well as ongoing compliance and review and approval of every single investment that investors make into the offering. So there’s the administrative side, and then there’s the value add side, right? If you work with a broker dealer that has experienced in observing multiple Reg A offerings and seeing perhaps why certain ones are not working out well, and other ones are, that can be particularly helpful in from an investor acquisition perspective, from a distribution and syndication perspective and investment banking perspective, as well as an understanding of how financial publications and newsletters work. So there’s multiple components, including co listing the offering and other platforms that you get by having a broker dealer of record or a lead managing broker dealer involved in the offering.

Douglas Ruark  09:03

Yeah, absolutely. And, you know, one of the things that I always like to you know, to impress upon issuers is that, you know, especially with something like Reg A plus, I mean, you’re executing something that’s, that’s more sophisticated exempt offering that you can execute. So it’s one level short of and S-1, essentially. And so it is very important to have a broker dealer on board in that regard. Obviously, a 50 state licensed broker dealer, there’s also the problem state issue where there are there’s additional filings even with Tier Two Reg A plus, where you’re you’re federally qualified, they’re still additional filings in certain states related to their broker dealer rules. And if you have an admin broker dealer on board, you obviously don’t have to worry about that as an issuer. The, from a from a retail standpoint, Shari, can you talk about just kind of the differences between maybe an admin relationship with a broker dealer with issuer versus, say a retail relationship. I know Rialto has the capabilities to do both. And I think that might be helpful for people that maybe they’ve never really had an interaction with a broker dealer and they maybe don’t understand that terminology, what would be the differences between a broker dealer operating from a retail standpoint versus an admin standpoint?

Shari Noonan  10:17

So a retail standpoint, meaning actually assisting with outreach? Is that ready to raise? Yeah, raising? Perfect. Okay. So and this is a, it’s a great question. Great question, Doug. So the primary work when we’re working with issuers, in terms of as a broker dealer, and a lot of other broker dealers that are on this panel, they’ll talk about the the compliance end of things and the compliance end of things refers to everything from the actual marketing reviews that Etan went through. And then everything as all the investors come in making sure that you know, your customer and anti money laundering and suitability checks are done, and then confirming the money movements. So matching up those approved investors with the the actual money’s coming into the escrow account, that’s really the operational end of making sure that a raise can flow. And you can imagine, if you’ve got a $10 million offering, and you have 10,000 investors, that’s quite a heavy lift, if you don’t have something behind the scenes really managing that. So that’s really the operational end. In addition, you can work with a broker dealer that has a distribution network and can really assist with pushing out distribution from an eyeballs perspective, you know, finding investors that are interested in the in the actual investment. And that’s really, when we talk about the retail broker dealer end of things, we don’t bring investors to the offering. However, we do have relationships with investment banks, and others, other broker dealers, to be able to federate that deal out to platforms and other interested investors to facilitate that end of the, of the relationship.

Douglas Ruark  12:03

Perfect. Um, so let’s also talk about, I think one of the things that I would encourage people to do is, is that, you know, if you’re interested in doing one of these offerings, if you’re interested in having a broker dealer on board, again, it is a requirement with Red CF, but if it was a Reg D offering or Reg A plus, and one of the things I encourage is is, is call around, talk to a number of broker dealers is obviously the, the KoreConX ecosystem, there’s, there’s some fantastic broker dealers in that ecosystem, obviously, Paul, I’m gonna pitch this question to you. So as far as fit goes, I know your your broker dealer focuses on like, I believe, like social impact type, type investments. So how important is it for an issuer to really work to interview different broker dealers, and really make sure there’s a good fit there between themselves and and the firm.

Paul Karrlsson-Willis  12:55

Doug, I think that’s the key element. As you said, there is there are a lot of good broker dealers out there in this space, and you have, you know, three of the best here with us today, or all of us, I would say that, again, it it’s access is going to be one of the key things you want. There are broker dealers as been mentioned already, where they work more with venture capital companies or family offices as a way of getting investors  into your deals. We, for instance, have family offices, we have venture capital, but we have a very, very big retail network. As I said, we’re owned by ideanomics. They have over 300,000 retail shareholders, we have access to that client base, as we’ve mentioned, Justly as an impact broker dealer. And what we mean by that is that we are actually focused a lot on companies that are ESG. But we also have companies or issuers on our platform that are not ESG. Because we do believe that we want to give our clients good access to good issues. So we’re actually donating a percentage of their profit to a nonprofit that specializes in ESG. So we’re kind of talking to the client base that we know is out there that belong to ideanomics. As well as the growing client base that we are seeing out there that wants to make an impact and want to do ESG and be involved in that way. So again, if someone’s an issuer and ESG, then we will be an ideal fit. There may be another broker out there that they would speak to, that has a better offering that suits their issuance and someone could be specializing in pharmaceuticals someone could be specializing in real estate and we can all talk to various broker dealers in their space that do specialize in real estate as real estate was one of the key elements to grow in this space. So it is important. The other questions to ask is how is how is AML and KYC done? And the SEC and FINRA are really looking at things right now in that space, especially around social media. So again, how can the broker dealer help you monitor social media help you with the message that you want to send out? Those elements are very, very key. So it is it is important to speak to more than one broker dealer.

Douglas Ruark  15:50

Richard, I’m going to come to you at this question. So I’m an issuer. And I’ve decided that, you know, that I want to work with with your firm I want to work with Castle placements. So what walk me just if I assume [uncertain], if I walk me through, what does that process look like? I you know, from from engagement through to getting a 5110 filing in? What what does that look like? Just because you know, I know, in our firm, we get a lot of people that ask questions about that they you know that there’s kind of the base discussion of what does the broker dealer do and why do you want them on board? But then there’s the question of okay, well, what does that interaction actually look like to go from introduction to the point where they’re actually on board with the offering?

Richard Luftig  16:36

Sure. So, we treat the process very similarly to the way that we do reg D 506 C. So we do full on due diligence on the issuer. And simultaneously we are preparing and strategizing on the marketing materials. So as soon as we get through the, you know, what we call the four pillars which are due diligence, the audit, the documentation with the SEC, and completing the landing page and ancillary marketing materials, we launched the transaction. So, you know, to us, it’s, I don’t want to put percentages on it. But if I, if I had to, I would say it’s like 50%, of a legal regulatory compliance process and 50% of the strategic marketing process.

Douglas Ruark  17:44

Etan. So one of the questions that we get a lot is, okay, I’ve got Dalmore group on board admitting my offering. Again, we’ll just use an example. Say it’s a Reg A plus. And one of the questions that we get a lot is, is it possible to have multiple broker dealers involved in one of these offerings? And so let’s say Dalmore is on board administering a Reg A plus, what is the process look like if if as an issuer I’m able to find, let’s say, another broker dealer that has retail clients that want to invest? What does that process look like to have additional broker dealers potentially come in, and work on selling that offering if there’s already a Dalmore group in place as the admin broker dealer.

Etan Butler  18:24

So you have the admin broker dealer, that gives you the ability to host your offering on your own domain, for a low cost relative to what most people think broker dealers charge, and to direct all of your promotion marketing, your own ecosystem of investors, friends, families, in institutions to your own website, where you’re the sole beneficiary of that promotional effort and exercise. Now you’re at a position of strength. And you could then look at, okay, how could other broker dealers and other investment banks and other platforms helped me on a success fee only basis, we have a number of our clients that are listed on other platforms, we encourage it, and in fact, we introduced them, many of them to, we have some clients that are listed on Republic co listed, we have some some of our Reg A issuers are listed on start engine, and, and many others. And so if you’re a yield based offering, we have 10 private REITs, you’re not going to want to pay a 7, 8, 9 percent fee. But if you’re a an equity offering, and the valuation is sufficient to justify paying a typical 6, 7, 8 percent fee to another platform, there’s a number of other platforms that are out there. Now, you have to want to be on that platform and that platforms committee has to accept you is going to be there. But what you’re doing is you’re putting yourself in a position to you know, to to receive potential investors that otherwise may not have recognized you’re offering. Reg A is very different than reg D. Reg D. The old school way was to build a syndicate you had a master broker dealer and you you’d build a selling group around it. Most broker dealers are not calling their book of business with $1,000 investment opportunity that can be put on a credit card. So you want to get in front of where these invent these typical Reg A investors are. And they happen to be consolidated on a number of pretty successful platforms, a couple of them are the ones I’ve mentioned. So there is a value add in running your own campaign on your own site for a low cost, while at the same time putting yourself in a position to get in front of hundreds of 1000s or a million potential investors and some of the other platforms and you’re not limited to one or two or three, you could grow that as far as you want.

Douglas Ruark  20:37

Fantastic, Shari, I’m going to come to you with this next one. So, you know, one of the things that I’ve really enjoyed is, is watching the technology over the last, you know, especially the last five to seven years, but the technology that has developed to not only take people to the subscription processes, through a web based system, do it efficiently, but also some of the the ability then for broker dealers to have a back end gateway into a system to to verify the securities tray, the security sales and what have you. So one of the benefits, obviously, of KoreConX in their system is that they have those back channels. So can you talk about the importance of, first of all, having a good solid back end network for the processing, but then the the broker dealers Interplay into that type of system, wherein the broker dealer is able to go in and efficiently track and engage in compliance checks on the security sales?

Shari Noonan  21:38

Absolutely, I think that’s really important when when we think about private markets, and when we first got involved in private markets, something that really struck us was the the fact that there really wasn’t a ton of infrastructure built. And I think now the industry has built that infrastructure, which is fantastic. But it’s infrastructure from the standpoint of the investment, the investment side, and really creating infrastructure to be able to allow 1000s and 10s of 1000s of investors to come in a cost effective way and invest in in securities offering. And the infrastructure required, then for all the service providers, including the broker dealer, to be able to effectuate that process, right to be able to have everything at their fingertips around the information, they need to make that process run smoothly and scalablely and scalablely, if that’s a word to scale, and then, you know, manage that entire process, there’s, there’s really, you need infrastructure, like what KoreConX, sort of delivers to pull all of that together? I think in addition, though, being able to have a system on the back end, where your cap table can be managed, and broker dealers were hooked in to the KoreConX system. And we can go in and see the cap table when when it’s appropriate to understand what the securities look like what restrictions might be on the Securities and at conferences, or if they’re still seasoning, for any type of transfer trade. Information is is critically important. To me, that’s what’s been missing, and being able to build that that infrastructure is what’s going to be required to get the industry to the type of scale that’s being anticipated in the next year to two years.

Douglas Ruark  23:30

Paul, so, I’m going to play the role of the neophyte issuer again. So I’m looking to execute an offering and I’m interested in getting a broker dealer on board, one of the questions that we get a lot is What are the fees? What does it look like as far as a fee standpoint, to engage a broker dealer and have them on board? And let’s go ahead and again, we’ll set a baseline and we’ll say Reg A plus and then I’ll go to maybe Etan and we’ll we’ll do a CF version of this, but let’s say Reg A plus what what can people expect? I’m an issuer. I’m looking to get your firm on board, you know, what would be typical as far as the fees, and the commissions that we would be paying to have a firm like yours on board and and kind of what would be the what would be typical, obviously, in the in the market?

Paul Karrlsson-Willis  24:22

Yeah, great question. I think, if in most cases, if if the broker dealer is just going to be broker dealer of record, you would normally find that they will charge around 1% To do that of the raise, and then it’s really what else that broker dealer is going to do for you. And again, we touched on this a little earlier about talking to the various broker dealers seeing where their value add is. So if you’re going to have a broker dealer, that’s going to help you with DD if you got a broker dealer is going to work with your legal counsel. If you’ve got to put broker dealer that’s going to do the fundraising, then you know, someone like ourselves, we charge between five and 8%, of what we raise. So when we put an issuer on our platform, and we go out to those 300,000, plus clients, plus the family offices and so forth, we will charge we will charge between five and 8%. On what we raise ourselves in that deal for for our client. I think the the standard is between five and 10. And again, that will sometimes differ between the service offering and how much is being done. And also the type of deal, right, if it’s a CF, an A and D, you normally find the pricing is is a little different. But I would say that you normally see us between five and 10%. 

Douglas Ruark  25:52

Okay, sounds good. Etan I’m an issuer coming to you, I’d like I’d like Dalmore to I’d like to do a CF offering with Dalmore. So let’s talk maybe on specifically on the CF ‘s, are there differences there in the market as far as what the commission impact would look like? Or there may be equity components, that would maybe be a little different there. You know, Reg A is a different program than reg CF. So if someone’s coming through and they’re looking to do a CF, what would they typically see as far as fees, maybe kind of equity give up component there to the broker dealer? Can can you speak to that?

Etan Butler  26:26

Sure. So across the market, what you’ll see on many of the marketplace platforms will be somewhere in the range of seven and a half to 12%. When you add the the kind of the cash and the and the equity fee combined. Our fee structure for CF includes an upfront fee for due diligence, as well as a three in one structure for capital raise meaning 3% Cash 1% stock at the on funds raised at the valuation of the offering.

Douglas Ruark  26:56

Great. Shari, I’m gonna pitch this question to you. So what what, what role might a broker dealer play after the offering is closed? I know, Rialto has an ATS system. But is there a role or a benefit to having a broker dealer on board after the offering? And maybe that is even just you know, discussing things like like, like having access to an alternative trading system? Can you speak to that.

Shari Noonan  27:25

So after an offerings completed, actually, from an operational perspective, many of the offerings that we have will have, you know, details in terms of the offering closes, but there’s still operational things that need to be done, whether that’s the escrow, you know, tidying up, the escrow finalizing any communications with investors that have come in making sure all of the funds are ticks and tied. And that’s really, that’s really takes longer in terms of post the actual clothes of the offering. After that, once everything, you know, the dust has settled as it were, you issuers can apply to place on an alternative trading system that allows for private, private market secondary transactions. And I saw in the chat, that there were a few conversations around that Rialto Markets as well as a few others, there’s a panel later today does offer a secondary market trading through our alternative trading system, we offer it directly with retail clients. So we’re not a broker to broker system, although we do welcome brokers on on the platform as well. So issuers can place their issuances onto the system and allow for their investors to monetize that investment.

Douglas Ruark  28:45

Fantastic. Well, look, first of all, I want to kind of end here on this segment by saying that it’s really been an exciting time, over the last 10 years or so, with the changes that came through with the jobs act with the streamlining of Reg A. Plus, with the enhancements they’ve done to reg CF. It’s really an exciting time right now for for private companies to be able to go out and use some very sophisticated programs to syndicate capital. I think ultimately, if you’re doing that type of offering, you know, especially a type of offering that’s going to allow you to go out into the public domain and solicit investors, it’s critically important that you have the proper support staff and support vendors in place and a broker dealer in my opinion is is just a given. I mean, obviously, it’s a requirement of a CF, I would prefer to see it in reg D’s. But you know, with Reg A plus especially I mean, you’re you’re executing essentially, you know, a private IPO. And that is a very sophisticated process. And ultimately, you’re going to have a lot of investors coming in from a lot of different states. You’re going to want that broker dealer on board. And obviously we’ve got some of the best here right on this panel. And I appreciated the opportunity to moderate this Oscar as always Thank you very much. And thank you to everybody that that’s been on the panel. It was really fantastic information. And hopefully people now have a better understanding of where a broker dealer fits into this equation. And obviously, what can their role be in the offering and then obviously one of their fees look like and what does the process look like to actually engage a broker dealer.

Shari Noonan  30:22

Thank you so much. Thank you, Doug. Thank you, Doug.