CEO and Co-Founder
CEO and Co-Founder
Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.
Bull Blockchain Law
Finding Bitcoin in 2011, I have a deep knowledge of blockchain as a technology as well as how the current regulatory framework applies to the industry. As a result, my legal practice aims to help businesses and individuals be regulatory compliant regarding cryptocurrencies and blockchain technology.
Carman Lehnhof Israelsen
Marty is a nationally recognized securities, finance and fintech attorney and counsels clients throughout the U.S. and internationally on various forms of structured finance, private and public securities offerings, fintech, real estate financings, venture capital and angel financings, fund formation and compliance, business formation and corporate governance. Since 2009, Marty has been active in advising clients in the crowdfunding and peer-to-peer lending space, with a particular focus on the JOBS Act, Regulation D offerings, intrastate offerings and Regulation A. His clients in this space include nationally and internationally recognized platform operators, sponsors, issuers, REITS, funds and service providers. He has been recognized as one of the top crowdfunding attorneys in the United States and continues to provide expertise and play a leading role locally and nationally in this area of securities law.
SENIOR BUSINESS DEVELOPMENT LEADER Strong background in all aspects of the financial services business from sales and product development to trading connectivity and securities clearing and custody needs. Expertise in building and growing businesses by listening and working closely with clients especially in the global equity markets. Proven ability to build alliances, develop business partnerships, and sell into all organizational levels. Able to formulate and execute business strategies, plus anticipate and react quickly to client needs and changes in market structure. KEY BUSINESS STRENGTHS AND ACCOMPLISHMENTS • Building multiple profitable Institutional and International trading businesses from scratch • Breathing life into tired financial services businesses and turning them into the premier businesses in their arena • Developing strategic plans that significantly increase market share and revenue • Repeatedly implementing ideas and leveraging products across business lines to increase revenue • Ability to attract and build diverse client base: Wealth Managers, Institutional clients, High Net Worth Investors & Broker Dealers • Skilled at forming, developing, and retaining highly competent and productive teams • Proven sales planning and global product marketing capability • Current Series 7, 55,63 and 24 Licenses"
CEO & Founder
CEO & Founder
David is a financial and investment professional specializing in private investments, equities, capital formation, and franchise development. He operates various businesses whose main purpose is to provide attractive and steady investment returns, create jobs, and promote economic growth.
Oscar Jofre 00:17
You’re on my apologies. Oh, we are,
Paul Karrlsson-Willis 00:19
I can only see David. So, again, Oscar, thanks very much for putting this all together. I will be moderating today, Paul Carlson Willis and the CEO of Justly Markets. We are a new fundraising platform for CF, reg A, reg D, we have a focus on ESG, we will be an impact broker dealer. What we mean by that is that the deals that we do have on the platform that aren’t ESG, we will, as a company be donating a certain amount of our profit on those deals to an ESG charity. And we are owned by Ideanomics, who are listed on NASDAQ who specialize in electric vehicles. David, would you like to introduce yourself, please?
David Lee 01:18
Yes, thank you so much for having me here today. My name is David Lee, and I’m the founder of net shares, we are an SEC registered broker dealer, we’re actually a startup, we just got registered a little less than a year ago. And just to kind of give you some background on me, I’ve been in the brokerage space for 25, 26 years, primarily in the retail space, you know, managing investment portfolios for clients. And, you know, I worked at Charles Schwab, Morgan Stanley and, and Raymond James, and most recently at Wells Fargo Advisors where, you know, we’d help people manage their investment portfolios. And, you know, a few years ago, I actually left the brokerage business to, you know, concentrate 100% of my time and effort on the franchise space, because it’s, you know, we also operate some franchise businesses. And in that process, we started doing some research on equity crowdfunding and got really, really excited about it. And so about a year and a half ago, we submitted an application to operate as a broker dealer. And we finally got approved earlier this year. So for the past 10 months or so, we’ve been going out and getting registered in in all 50 states. We just got that done this month, that took some time. But, you know, under a broker dealer, we’re looking for, you know, Reg CF deals, reg A plus, and also reg D offerings. So we’re a new startup and excited to be here with you guys. Andrew,
Andrew Bull 03:05
Thanks, Paul. Yeah, appreciate KoreSummit obviously, for having us. My name is Andrew Bull. I’m the founding legal partner of Bull Blockchain Law. And as you can imagine, it’s a law firm that’s dedicated to clients dealing with Blockchain technology. So obviously, we facilitate a lot of the legal background work that goes into launching a reg CF offering or reg D offering or reg A, whatever the exemption that is really sought. I started out on the technology side of blockchain running a crypto mining business years ago, and then the legal side. So yeah, I mean, at a high level perspective, we’re really just trying to make it as simple as possible. Working with also broker dealers like David’s company as well, that are trying to facilitate that process and that timeline and really create a easy path for clients to kind of operate through from a compliance standpoint. I also am teaching a blockchain law course at a law school in Philadelphia, where I reside.
Paul Karrlsson-Willis 04:04
Thank you, Andrew, and Marty. Last but not least,
Marty Tate 04:08
Yeah, thank you. Marty Tate. I am a securities lawyer based out of Salt Lake City, Utah, with boutique corporate finance and securities firm. I have been involved in the crowdfunding space since the very beginning. That’s where I met Oscar and KoreConX was involved in you know, the early stages of the Jobs Act, and since that time, have advised dozens and dozens of platforms, issuers, broker dealers, and other service providers in this space. Back three or four years ago, during sort of that the ICO boom we a lot of the people that were We’re doing crowdfunding for that those calls got replaced with people want to do token offerings. So we dove headfirst into the deep end of that. And then advising companies, issuers, service providers on you know, basically all things having to do with token offerings, Blockchain related businesses and offerings and, and digital securities and Yeah, happy to be participating. It’s great group.
Paul Karrlsson-Willis 05:37
So, to start off, Marty, I’m going to come straight to you. You know, as you say, you were here at the beginning of crowdfunding, and soon all the legal changes. I think the best place to start is what’s FINRA and the SEC’s definition of security?
Marty Tate 05:55
So, Andrew’s laughing.
Paul Karrlsson-Willis 06:00
I thought I’d start with an easy one for you.
Marty Tate 06:02
I don’t know if that’s an easy one, you know, security is, Andrew’s laughing because I, I, I’m, you’re kind of stumping me, because that’s it’s a broad definition. Right? I mean, a security is, is, is an investment product, it’s something that, you know, I mean, guess you could go to, you know, go to the Howey Test and say, you know, it’s what is the intent? What is the is there the sort of the factors that are there, but a security typically is I mean, when most people think of security, it’s an investment it, whether it’s takes the form of debt, whether it takes the form of equity, some other investment product, it could be, you know, revenue sharing, it could be anything that that somebody acquires, or gives you value for with it with the intent that there will be, you know, potential gain or increase. But, you know, trying to say, and I think that’s been one of the biggest issues with with tokens is trying to say, Okay, is it a security? Or is it not early on, people would say, Well, this is a utility token. But it might have some sort of, you might have an actual utility or a nominal utility, but if it if people were buying it with the intent that it was going to increase in value, then the SEC said, you know, what, that looks like a security. I mean, that looks like an investment product or an investment contract. And, and so, you know, you say that, you know, you’re leading off with an easy question, but it’s, I think that’s a really difficult question to, to kind of pin down especially in, in, in the space of digital securities and tokens and, and coins. I think that digital assets, I think all those things are NF T’s, all those things. You know, that’s the big huge question that that we continue to grapple with, and try to put laws that had been in effect for, you know, 80 years and have developed over, you know, the past eight years, trying to use those to guide our, you know, the the legal advice that we give the interpretations that we that we provide to digital securities and tokens, so, yeah, and with a lot of with a lot of the probably question marks at the end.
Paul Karrlsson-Willis 08:37
And, and we all know that, that wasn’t an easy question. And, and is kind of, at the root of, of everything here with something with like the NFT’s. And Andrew, because you were laughing, the poor Marty getting stuck there and geting the trick question. You know, we start looking at NFT’s and the different digital securities that are coming in, you know, and again, they touched on how FINRA looks at this, the SEC looks at this. How does, how does, how does your approach change on the legal side towards these than what would normally be a traditional placement, a traditional security?
Andrew Bull 09:20
Yeah, for sure. And to Marty’s point, the complexity of that general question also leads to kind of every situation being different. It’s almost a case by case analysis. And the SEC has obviously been pretty clear about that from a contextual standpoint. And so we have this administrative ruling precedent and some Federal Court precedent, but the reality is, is that we don’t have a massive amount of precedent in the context of digital assets. And so realistically, when clients come in and we start kind of having those preliminary conversations, it’s really about honing in on exactly what that investment is, what the economic interest is and what it’s representing. Because if it’s something in the tradition sense that is equity or debt, that’s relatively clear, you can kind of categorize it akin to something that was representative in the traditional context before digital securities even existed. And so we can kind of think about it right as the technology is now coming in, to create a, almost a larger ease of access in accessing digital assets. And that is really counterintuitive to the compliance side and the exemptions that we have in the United States on the security stack. So from a high level perspective, and then without even going down the rabbit hole into like royalty based NFT’s this early in the panel, but realistically, there are all these different now applications from a technological standpoint, and every client is going to have some one different risk perspective, but also to some different economic interests baked into whatever it is that they’re offering. And so that’s why it’s super important to kind of narrow it down to determine, Hey, okay, what is this economic interest? Where does it sit best in the exemption process? Or the full registration process with the SEC? Or are you going to be that company that goes and tries to form offshore and release it without being exempt? The latter, obviously, carrying the largest amount of risk in this context, but all of it is really getting to this general notion of, okay, we have these parameters, we know what they are in the traditional sense, how do the this new tech, how does this new technology fit into that mold?
Paul Karrlsson-Willis 11:26
Excellent, excellent. And And so David, you know, part of being a broker dealer like Justly, we come up against potential issue is that a looking looking to fundraise via CF, reg A, Reg? D. So, in this space, under these digital securities, do you do anything different from your end as far as DD is concerned? Or are you are would you use the legal groups like Andrew Marty, to do their process, work with the SEC, and then then come back to you for the fundraising? You’re on mute David?
David Lee 12:13
Yeah, I think it’s, it’s more of a concentrated effort, you know, us in the legal team will work together to ensure our due diligence is done properly, and that there are no, you know, like disqualifying events. I don’t think the legal team is going to do the bad actor checks. But you know, we definitely want to do that on our end. And just make sure, you know, the business is a viable business, and that the business idea makes sense, right. And so, you know, there are certain areas where we’ll work with the legal team to make sure that due diligence processes is done correctly. And then there are other things that I would do on our own. Like the back, excellent,
Paul Karrlsson-Willis 12:58
So flipping to you, Marty, on that. What happens on the legal side issue of comes to you is looking to do reg A, what’s what’s the process? How would you work with them on this?
Marty Tate 13:13
So it and that’s a an interesting start, because a lot of times the insurer will come to us and they don’t necessarily want to do it or reg A, especially the digital securities, they might come and say, We, you know, we have this token we want to do an offering. We don’t think it’s a security, we have utility. That’s been that was kind of the traditional story. Now, I more and more people are, understand that what they’re offering is a security and we’ll provide them kind of okay, well, here are the options here are the exemptions to these offerings, and you know, you’ve referenced those whether it’s a reg CF, or reg D, or reg A. And then the questions there, just follow the, the traditional questions. Okay, so, I do want to know, I do want to understand what the token is what they plan to do with it, why are they why are they selling it? And, you know, if it is a good candidate for, you know, something like it. Any depends also, like, what is the audience? Who do they plan to sell it? How much do they plan to sell? I mean, that’s going to dictate the exemption that we’re going to call it that we’re going to use, but go into your question about if they wanted to do a reg A as you can. So they want to sell, you know, more than 5 million and, you know, up to 75 million of this token and pursuant to reg A. I think it’s really important to understanding again, those questions, what is what is the token do what are you selling it for? How will it operate? You know, there was I was involved in a number of early reg A token offerings, tokenized offerings and that, you know, all stalled out you know, it wasn’t unique I think most most of those offerings stalled out because the SEC just had so many questions. A lot of those questions revolved around the secondary trading and the transfer agents and how those are track which groups like KoreConX and other groups have helped better provide better answers for that. But you know, we would get started just by finding out again, about the company what they want to do with the token and really the attributes of that token and how that will work. Because those need to be really does need to be adequately described in the in the offering circular, as well as particular risks that might be associated with that token that might be unique. And in addition to the standard risks that will be associated with a digital security.
Paul Karrlsson-Willis 15:54
Now and, again, Andrew, that’s, that’s great Marty. And Andrew, on that side of things. You know, you go to the SEC has how you approach a digital security, listening with the SEC, in this reg A space, change the way you have to present these these documents to them? Or is it still the standard document you would have used five years ago?
Andrew Bull 16:20
Definitely has changed for sure. I mean, without a doubt, there’s and to Marty’s point. I mean, like 2017 submissions, they were just getting batted, like away, left and right by the SEC. And it’s transformed astronomically over the last four years. And the language component that went into say, the application and also the stage at which the business is also is a another contributing factor. Because for all intents and purposes, the reg A was really meant to try to get a company that is like already into their revenue generating phase and now wants to theoretically go public, but not fully go public. And so the language that we’re inserting into the documents themselves is very much structured around some of the questions that Marty brought up in terms of the transactional timeline of the token, how it’s going to function, what is the actual purpose, and those descriptive disclosures as well, in regards to how blockchain technology functions, how third party service providers are going to function on these networks as well. And so all of that kind of gets curated into a new form of language descriptions that are added into the applications. And initially, the SEC, they just for lack of resources or time or for whatever reason, we’re very standoffish to that information, and really not solving their own learning curve. But we’ve seen that transformational change definitely happen. And as a result, there’s now a kind of key language that can be inserted that really encourages them to say, okay, we can actually understand kind of the larger ecosystem that’s going on here in regards to the token, I mean, I revert back to one of the early ones Blockstack, with their token in of itself, where they did reg D, and then switch to reg A, subsequently. And realistically, the whole purpose of it was developmental functionality on their platform for from a software developer perspective. So really different from the traditional securities that were being offered in reg A before that. And that in of itself requires a plethora of technological information and education really, for the SEC. So high level perspective is yes, definitely, definitely new language kind of being created. And, and I mean, like, Kore and a lot of these other companies as well, they help with that navigation too, which is super helpful.
Paul Karrlsson-Willis 18:38
Awesome. And so David, on your side of things with reg A plus, these issuers do need a sponsoring broker dealer. So how does that work? What is what is that wrong mean?
Oscar Jofre 18:54
You’re on mute again, David.
David Lee 18:58
I apologize. I have people walking in and out. So I think, you know, when it comes to digital securities, what we do as a broker dealer isn’t much different than how we would approach a non digital security in terms of due diligence, you know, it’s all pretty much the same. You know, it’s, it’s really, you know, the issuer and, you know, them deciding whether or not they want to put this on the, you know, on the blockchain and, you know, from a broker dealer perspective, you know, we’re registered in all 50 states that allows the issuer some relief in having to register in all states, but pretty much what we do on the due diligence side and work with, with the attorneys, it’s, it’s all pretty much standard, and it’s not different than than a non digital security.
Paul Karrlsson-Willis 19:50
Yeah, and you touched on blockchain there and we do know that KoreConX, you know, one of the key things with them and and how they’re able to do the administration and be transformation for a lot of these issues is that they use blockchain. So Andrew as who are the blockchain expert? How has that changed in the process? And has it made it easier? Again dealing with the light on the legal side dealing with the likes of the SEC? Or is that also confused? Confused people a little more? Because, again, it’s new technology?
Andrew Bull 20:30
Yeah, I think it’s a little bit of both, honestly, I mean, the, when they launched the fin hub, that was super helpful, because you could, on behalf of clients kind of bring issues to the forefront. And you’re not always going to get a response. I mean, at the end of the day, they’re a federal governmental agency. So we have to acknowledge that. But at the same time, at least, it meant that they were dedicating some resources to kind of understanding the space. And now they have staff as well, that are also specifically dedicated to the space on top of that. So I think that it’s actually in line with kind of the general populace as well in the United States is that they’re solving that educational hurdle, understanding the technological component to it over time. But also, they have other priorities as well. So we also kind of always have to acknowledge that contextual component is that, for example, the SEC prioritizing, increasing the amounts in CF and reg A, and in terms of how much you can raise, like that’s a priority in of itself. And I don’t know if they, they definitely didn’t do that intentionally in regards to this space, specifically. But blockchain is for all intents and purposes really meant to allow for increased participation from the general populace, right, we’re trying to solve this kind of not only educational barrier, but system sophistication barrier, as well, from an investment standpoint. And so I think that they’re starting to come around to that, and we see that in kind of tangential benefits with them, increasing those amounts, or allowing for more projects to go through the approval process. So the whether that’s a direct connection to the benefit of the technology and what it’s bringing to the table, I think that’s yet to be seen. But for for this scenario, at least that we are starting to see some element of connection going on for sure.
Paul Karrlsson-Willis 22:16
Excellent. And, and again, moving to Marty, you know, I just touched on you know, broker dealer of record, um, can you explain what that means legally for the issuer? Why do they need a broker dealer of record, and does that limit them to one broker dealer working on their their behalf.
Marty Tate 22:41
So with regards to the broker dealer record, technically, it’s not required to have a broker dealer. That being said, it’s 100% advisable and every reg A client that I have, we definitely will steer him that way. The issue there is that there are a handful of states that require if there if you do not have a broker dealer, that they require the issuer to be licensed, as, you know, issuing an issuer those securities and that just, I mean, that becomes problematic you have to take if you have somebody with the proper securities licenses and go through that licensing process, and I guess I have had one reg A issuer go that path. But I, I think especially now with groups like like yours, Paul and David’s, I think the the benefit of having a broker dealer far far outweighs any potential costs. And the I guess the second question was, can you have more than one broker dealer? Absolutely. You could have a broker dealer that acts is that the broker dealer of record, like you said Paul, and then you could have selling agents underneath. We’ve worked on reg A offerings, where we had, you know, several broker dealers, you had at the [uncertain] broker dealer, acting as placement agent, then you had several other placement agents that were going out and selling that the offering. So there’s, there’s a lot of value in and, you know, some, and they, they vary, and I’m sure both Paul and, and David can speak to this, but you know, that the level of services I mean, there’s, there’s the basis just, you know, having that broker dealer record, and then in some cases that the broker dealers are actually out soliciting clients and, you know, like, being compensated accordingly for that.
Paul Karrlsson-Willis 24:57
Yeah, and like David said, you know, David’s registered in 50 states for that reason to make it a lot easier for excuse me, for for his issuers, you know, David stain with with that, you know we’ve kind of touched on legal we’ve touched on the broker dealer aspect we’ve touched on where KoreConX does, he’s able to do the administration element and the cap table. How do you how do you as the broker dealer of record marry all of that together? Is there a particular process? Is it like you I know, you touched on it a little earlier about, you know, working as a team, but could you explain that just a little bit more on just how you integrate your flows with your work process with legal and ankle conics?
David Lee 25:50
Well, you know, it’s still a work in progress. You know, being being fairly new, it’s just a bunch of phone calls, you know, getting getting Marty on the line getting Oscar and Julian on the line and, and the issuers and, and just moving forward, as I mentioned earlier, we haven’t done any deals to our platform yet, we are getting ready to launch a couple of reg CF deals in the hospitality space in the franchise restaurant space. But yeah, maybe if he asked me that question, in another three months, I’ll have a better answer for you.
Paul Karrlsson-Willis 26:27
Okay, thank you, David. I’m so so Andrew, in my experience, on on the broker dealer side, we’ve the way we’ve looked at it with issuers is they’ve come to us we’ve done our DD, we like the offering, we then engage legal we push them to a legal group like yourselves, to go through that process of helping them again, get registered with the SEC as a as a reg A. When do you when when does the client or the issuer then have to engage? The the administrator, the transfer agent? Is it the same time that they are working with you? Or is that the second stage after the the SEC has given them the reg A?
Andrew Bull 27:19
Yeah, very much the ladder, I mean, there’s now a lot of information that’s coming out of the SEC in regards to testing the waters. So there’s the interim period between where they actually even submit the application or get approved for the offering, or they can go out and realistically, not only in the general advertising context, but also really accumulate information and understand whether there’s going to be commitments. And of course, you have to provide the proper disclosures in regards to not being able to take any money and and in certain circumstances, some people want to jump in immediately. And you really have to say, No, you can’t do it yet. Like we’re just trying to figure out the level of interest. And so within that timeframe, it’s it’s very much not an immediate necessity from a transfer agent perspective. But at the same time, BDS can be really helpful in that context as well in terms of testing the waters. So I think that that interim period is really instrumental for somebody who’s potentially considering the application, because obviously, it’s a significant cost from that perspective. So that’s very much something that we try to encourage is, why not just take a little bit of time, figure out the interest, and then go from there, because you might find out that there’s an exorbitant amount of interest, or you might find out that there’s not enough and you’re going to switch over to reg D, which does happen. And that’s the reality of some projects, which is totally fine. It’s just that we want to make sure that they’re not all gung ho into it, and then they go in and go to the first day of approval, and then they’re like, there’s no one there on the other end to actually buy it. So that’s really what we try to encourage. But as far as the transfer agent goes, it’s, it’s obviously in very important in the process once you are approved, but prior to that, I think testing the waters is kind of helpful before you jump into that.
Paul Karrlsson-Willis 29:07
Yeah, and I’m glad you mentioned testing the waters, then something new that has just come up so Marty, can you kind of I mean, that rule change has come what in the last 12, 18 months of testing the waters and what you’re now enabled to do? Can you explain what it used to be and what the difference is now?
Marty Tate 29:27
Well, the big difference actually is on the reg CF side, where, you know, reg A plus you’re allowed to do testing, testing the waters campaign. You know, you you have to be very careful about you know, what you say and that it’s, you know, and, and how that would indicate they’re making indications of interest. They’re not, you know, delivering any funds that can’t do that until the offerings actually live. But the big change was on the reg CF side where that was not possible so that people would kind of go To the time and effort and expense of putting together reg CF offering and they couldn’t speak to it. I mean, it was it was pretty clear that they had to be pretty quiet about what was going on until the offering would have actually till the form see had been filed and the offering was live. And so now issuers are able to go out and do a test the waters and see what kind of interest they would get even before they do a reg CF. And you know, the barrier to reg CF is a lot lower, it’s it’s not a reviewed offering by the SEC, so doesn’t need to be qualified. So in the form c is a pretty is a is really a you know, pared down document compared to the one a offering circular. So the cost is, is significantly less. But that being said, it’s still it still is a constant expense. So I think that changes has made a difference for people to be able to go out and start, you know, talking about whether you don’t want to do. But I think that is an important part about a reg A offering. You know that it’s traditionally there, and I think for it should probably be used more. Sometimes people are a little hesitant. They want to they want to be quiet, they want to be careful and not, you know, give away the trade secret or whatever. But I think it’s important to go out and and make sure that you have those that interest there before you. Yeah. Qualified and, and like you said, you don’t want to have crickets once you’re offering live.
Paul Karrlsson-Willis 31:38
Right. And now that CF is up to 5 million, there’s probably a lot more people moving into that CF space now to to be able to raise funds. So seeing is sort of staying with that testing the waters is there in particular that they they can and cannot do how well can they use Twitter? Can they? Can they go out on social media? Any which way they want? Is there a restriction around what they can and cannot say?
Marty Tate 32:07
Yeah, there there is. I mean, obviously you can’t say whatever you’re you’re limited in, in your ability. You need to be careful in in every anytime you’re talking about securities offering whether you’re testing the waters or not. But you there’s specific disclaimer language that needs to accompany any sort of testing the waters communication about, you know, the offering that, you know, everything subject to, to your disclosure documents and the offering hasn’t, you know, it’s not live and we can’t accept money at this point. There’s, there’s specific language that needs to accompany that. So yeah, you can’t just go crazy, I guess. But but you can I mean, you can use all of those mediums. Absolutely. Twitter and Instagram, and, you know, whatever ways you want to advertise it. That’s, that’s allowed.
Paul Karrlsson-Willis 33:06
So David, you know, again, going back to being a broker dealer and having to test the waters situation. How does how does a BD of record manage that? How do we know from being both being FINRA members, they monitor a lot of what we do as as a broker dealer, and how we position ourselves. So how does a BD like yourself? Cover yourself and make sure that, you know, you’re managing this in a way that fits with FINRA rules?
David Lee 33:39
Sure. Yeah. So you know, as Marty alluded to, there are things you can and can’t say, and not only a testing the waters campaign, but also a regular, you know, Reg CF, or reg A plus campaign or even a reg D, right. And so, you know, our job here as a broker dealer would be to assist the issuer, in reviewing their advertisements and making sure that they’re not making any, you know, outrageous statements and anything that’s, you know, that’s out of line. And, and so we’ll review that we’ll, you know, check with legal counsel to make sure you know, any questionable items are address, but I think, you know, the main point is, you know, as a broker dealer, we’re here to provide guidance from a compliance perspective. You know, that’s our primary and then secondary, you know, some broker dealers will, you know, go out and source investors, and they’ll, you know, there will be an additional charge for that. But, you know, basically our role, as you know, Paul is to make sure that the issuers are staying compliant and that they’re abiding by all the rules and regulations and so we’ll work with Marty and Andrew and, and counsel to make sure that, that they’re compliant.
Paul Karrlsson-Willis 35:01
Excellent. Excellent. So, Andrew, when we we look at the processes, and we’ve kind of touched on every aspect now. The key elements definitely is is on the legal side. I mean, until the SEC, the foremost on Is there anything else that we haven’t touched on that we need to be aware of, especially around digital securities compared to, as I say, previous famous? I mean, I, you know, I’m a big follower of Tim Tebow. And he’s just launched his NFT for legends. And then you have the Dallas Mavericks, Rick’s now giving out NF TS for anyone who turns up and, and what is in play for basketball? So, I mean, this isn’t this isn’t going away. So what is there other elements that we should be aware of?
Andrew Bull 35:52
For sure, I think from an investor perspective, so the client thinking from the perspective of their prospective investor talking about lockup periods, for example, or constraints on resale, these are really important subsequent developments that get factored into the equation as well, because sometimes we have clients that we need to kind of explain this process. So they know that day one, their shareholders aren’t going to be able to turn around and immediately go do something right with their shares. or Now we’re even in the phase of NFT products that are out there, where maybe revenue being generated from NFT sales that are flowing into the company and will be distributed to security token holders, though those processes might not take effect after until a certain period of time has transpired. So it’s really about kind of managing expectations, because obviously, the blockchain cryptocurrency industry moves a mile a minute in terms of everyone’s expectation of what they’re getting out of the industry. And you really have to taper those expectations, because the reality is, is that these constraints are very much predicated in consumer protection. And so there are examples around someone who’s a retail investor participating in a reg A, like, you’re not just going to be able to come in with a million dollar investment, like, that’s just not going to be realistic, because you’re either most likely accredited, and it doesn’t make sense. But if you’re just qualifying as a retail, you have limitations on that. So it’s not only limitations over investment, but also limitations on timing in the subsequent kind of scenario. And so I think sometimes, again, going back to that general notion that people see tokens in the traditional crypto context, and they see them getting listed on exchanges, and then everything goes gangbusters. And it’s, it’s really not the same scenario, because we’re talking about different economic interests well, in certain circumstances, but for all intents and purposes, in terms of regulation, and so there’s those limitations that should definitely be factored in.
Paul Karrlsson-Willis 37:52
And same thing with that, Marty, you know, we, we talked a little bit about due diligence, and the, again, these companies coming to yourselves and Andrew, looking for guidance and how they structure their offering, is that something that you see as a key part of the legal element? Or are you looking for, again, the broker dealer of record, to be helping more with a DD and the, the way the company is positioned and what they’re raising? You’re on mute Marty.
Marty Tate 38:31
Sorry, I’m pulling a David. I think that that falls on, on, on us, I mean, if the, if the broker dealer has input on that, that’s fantastic. But, you know, really, I think that the clients are coming dust for help on how to structure it, what’s the best, the best route to go in, in offering their digital, you know, their securities that are digital securities? And I think that, you know, I, I tend to do, you know, maybe Andrew is better at this, but I tend to provide a lot of sort of initial free consultations, where I’m, I’m, you know, weighing in way more on on maybe even the business model than, than I probably should be, but but I think that that, I think that people need to a lot of times they have a great idea that there’s things that they just haven’t thought of and when you come when you’re trying to take this idea and and fit that that square peg in the round hole of us securities laws, it can be difficult and we have to kind of think we have to be creative in the way that we we think about these things and say okay, you know, is this the best option and you know, I had a conversation just yesterday with a client and they they spent a lot of time money ramping up their idea and, and I could just see it was it was a zoom call, and I could see in their faces as I was kind of presenting these, you know, just asking questions and saying, Well, you know, how does that if I could almost see the the excitement, you know, drain out of him like, oh, man, we, we haven’t really thought about that. But I do feel like that’s part of our role is to help them, you know, understand the legal landscape, and, you know, help them determine if this is a viable option given that landscape.
Paul Karrlsson-Willis 40:28
Yeah, and we’ve seen the same with some issuers coming toward us, it’s, you know, some issuers know, basically, exactly what they want to do, and how they want to do it. In a lot of cases, they’ve they this is not their first rodeo. Others really starting from scratch, you know, they’ve, they’ve had a business for a year or two. And now they’ve suddenly realized that there’s these platforms and these capabilities to raise money and help them go to the next level. But what that means they don’t really know. And then you have also the issue of that comes along, says, hey, you know, what, my company’s worth this much. And you sit down and go, How do you get to that number. And their expectation of what they can do, how much they can raise from their initial valuation is is not always accurate. So when you when you come across these different types of issuer? Andrew, is, is there a particular place that you start and and be able to give them guidance?
Andrew Bull 41:40
Absolutely. So, jurisdiction is one of my first questions always, like, Who are you expecting to sell this to? Because, obviously, in this industry, there’s sometimes an expectation that they’re going to be able to offer it to anybody in the world. And that’s just unrealistic. And so that’s typically where we start. And then we start honing in on some of the questions that Marty was highlighting. But also, on top of that, just kind of pulling on that thread as well, is really talking about the functionality of the asset, because everyone’s seeing digital securities, for example, the buzzword benefits are secondary market liquidity, ease of transfer, so on and so forth. And I think in having that conversation, not only about the jurisdiction, but then about what the economic interest is, what’s the purpose, what’s the long term objective, that all then kind of pulls out some of if there’s any underlying motivation for what they’re trying to accomplish? And I’ll revert back to your prior question about NFT’s. It’s interesting how they’re, they’re seeing, like, for example, companies are seeing other companies, they’re releasing lines of NFT’s. And they’re like, Oh, we want to connect our line of NFT’s to the security that we’re offering. And then there’s questions over the asset backed component of the security and whether that would fit the mold for reg A. And so within that process that you’re referencing, it’s really all about kind of trying to pry out those underlying motivations as well, and what they’re going to do subsequently, even if it doesn’t necessarily have to do with the digital security that they’re offering. So I think that’s really what is also kind of a more ambiguous concept within these discussions, that is definitely important to be highlighted for sure.
Marty Tate 43:29
One, I want to weigh in on something because the Andrew said that I think it’s really important is that an Oscar alluded to this in his introduction, is that sort of the the allure of the secondary market and trading and I think that people, you know, think, okay, hey, we’ll just we’ll sell our, our, you know, digital asset, and we’ll do it in compliance with securities laws, and or we’ll you know, and then we can list it on an exchange or we’ll, we’ll do a reg A and it will be an unrestricted security, and therefore, we can immediately put it on exchange. And that’s, you know, that that’s something that’s just not that simple. I mean, even, you know, in the qualified reg A, that you’re seeing what tokens it’s saying. I mean, they’re just saying we might do this, you know, we hope to do this, because that, that, I think that piece is still is still incongruent with us securities laws, they haven’t, I mean, you can build it into smart contracts, how, you know, that. I think that piece is actually you know, fairly I don’t wanna say simple but you could build it in in smart contracts, the way that restrictions could lapse or, but that tying those two things together, the secondary you know, trading exchanges or alternative trading systems with the security that the, the securities whether it’s, you know, sold under at That reg CF or D or unrestricted securities sold into reg A still something that’s not 100% Crystal clear.
Paul Karrlsson-Willis 45:12
And, again, we one of the elements here, right, the the Jobs Act changed things. Recently, in the sense of, you know, we see from reg A, you don’t have to be an accredited investor. Um, so was that made? And again, I’ll throw this one to you, David, is that made it harder for the digital securities in the sense of how, again, the information you send to the potential investor, read transparency and to be able to explain the the actual security?
David Lee 45:57
Can you repeat your question again, Paul?
Paul Karrlsson-Willis 46:00
So with with the the ability now for non accredited investors to get involved in CF from reg A, and digital securities coming along, the information, the complex digital securities are quite complicated, as we’ve all touched on, how does how does a broker dealer manage that information and making sure there’s transparency around the real key points, as we’ve had, again, as Andrew and and Marty have touched on?
David Lee 46:33
Yeah, so it’s really about disclosure, disclosure, disclosure, right. And so we want to make sure that, you know, all the key elements are in the disclosure documents, whether it’s a form C, or, you know, the other, you know, any other forms. In, you know, I think that’s probably a little bit of a challenge for me personally, because, you know, when it comes to crypto, I don’t, quite frankly, shouldn’t say this year, but I don’t, I don’t understand a lot of the nuances that are out there. And so, you know, that is a bit of a challenge. But, you know, what we want to do here at NetShares is do, you know, deals that, you know, just more your conventional deals, cash flow and deals, royalty, you know, assets, you know, real businesses that have viability. And so I think the onus is really on the broker dealer on us to be able to vet these companies and making sure that the, the business prospects of the issuer are at least, you know, solid and viable. Now, the business may not, you know, ended up being successful, but I think it’s up to us to vet that out and make sure that, you know, what they’re stating are, are true statements, and they’re no emissions of facts, and things like that. So, you know, I think the other important key to this too, is investor communication, you know, after the deal has been funded, what’s what is the issuers, communication strategy, you know, like publicly traded companies, they have quarterly conference calls, right, quarterly updates, where, you know, they provide results, and, you know, revenue, top, bottom line, etc. I think, you know, as we go more deeper into this space, we have to have a good solid investor relations strategy in more investor communication, and that’s, that’s how we’ll increase our transparency in the space.
Paul Karrlsson-Willis 48:34
And I 100% agree with you that, David, I think the big key element is, is is pulling that data and making as much data available to the, the investor as they can, and certainly on the on the platform that that we have justly. We have a data room. So we pull in as much information as we possibly can, and have have a data room. So Andrew, you’re talking about the data room and the information that you know, we’re gathering on the on the BD side and an offering out there to the underlying investor? Has that changed any as well in this digital security space? Is there more information that as has been asked for, or is needed, then then it used to be?
Andrew Bull 49:27
Absolutely. I’ll give you an example. So I had a company that was tokenizing, a really large golf course in the Caribbean. And the they got full on into their offering to the extent that they kind of discovered that a lot of their traditional investor pools. were struggling to understand the concept of digital security. And there were questions around custody and them being concerned over their private keys. and managing all of that. And so as a result, there was a lot of lifting on behalf of my client that really resulted in them communicating over and over again, trying to kind of provide some reassurance. And that’s definitely different because it’s more of like a concern over a technological issue. That may be unrealistic from the perspective of the investor. But it doesn’t matter if it’s unrealistic, they have that perception. And so there was basically a push to try to revert back to traditional securities in the offering as well to try to serve both groups of investors. And anyways, that’s relatively prophetic, you know, itself, as you can imagine. And so, I mean, this is a few years ago, and so it’s changed for sure. But at the same time, there’s definitely that component from a investor perspective that if you’re not providing kind of streamlined information that’s easily digestible, then there’s going to be confusion over what the Investor Responsibility actually is, from a technical standpoint. So that’s definitely something that has changed for sure, comparatively to traditional offerings.
Paul Karrlsson-Willis 51:08
Excellent, excellent. I see, I see Oscar is popped up in the corner.
Oscar Jofre 51:13
I’m just got a very small finger here and this whole thing, great discussion, guys, I look, I know it, you know, this discussion is evolving. There’s so many different moving parts to it. Both from the legal and the broker dealer side. And I know people have a lot of different questions. So one of the things that’s really great about this particular event that we’ve not been able to do if, if all of you have been there before is that we’ve never had the opportunity for you to engage with each individual speakers on their own. Because I know some questions can be general, but so we have about five minutes. You know, if there’s anybody here right now that has any questions, you can simply raise your hand. And we can have you asked a question from, you know, Paul, David, Andrew, or Marty. But I recognize as well that some of these questions are better suited to be in the lounge, which we’re going to be going there to shortly with everyone, but I want to give everyone an opportunity here. Because there’s been a lot of, you know, chats going on with questions. So we want to make sure if there’s anybody’s got their hands up raised up, so I’m just going to keep an eye on that. Um, you know, one of the things that that strikes me is, I think, Andrew, you were saying, at the end that I like is that there is all all security tokens and digital securities, they’re not all the same. And not all of them are ported the same way. So the the issue of the discussion of custody and all that people really need to understand when that terminology comes out. Would you not agree with that comment?
Andrew Bull 52:54
Oscar Jofre 52:55
Yeah, I, I run into this a lot. It took me a while I got to be honest with you. If you know, when people hear the word custody, I now know that we’re not talking about an institutional investor at times, that’s one. And that is sometimes it’s not going to play so well. With the retail investor, if you were really need to. There you go. It’s, it’s the people really, this look, I’m a simple individual. The way I think I look at the regulations, which are amazing. I cannot say no, I’m a Canadian. I love the Jobs Act. Because listen, if you follow the law, you can do so much with it. You really can. When you’re from another country, you will appreciate what you can do. But what I what I what I noticed over the years was this using buzzwords people using with visitors to Google, I need a customer, there’s got to be a costly component to it. I need to hold it here. I need to but what they’re not asking what they’re not prefacing, please, you know, elaborate on this. They’re not prefixing it on what type of investor we’re talking about, which, you know, that seems to be the nail biter that a lot of people need to understand. This is for that type of investor. And this is for that. I just like to hear your comments on that.
Andrew Bull 54:21
Absolutely. No, I couldn’t agree with you more. I mean, realistically to you have, when you open it up, say in the reg A context, and you’re having an influx of retail investors, it’s going to be a drastically different perspective, because nine times out of 10 It’s not like they’re going to have this massive booking of investments behind them either in terms of experience, and as a result, it may have some different level of understanding and they may have maybe entered into the crypto context in some way shape or form and have this unrealistic expectation of their ability to move it going back to that point, but also what they can and cannot do over there elements of control. And so that is really and the example that I was giving as well was very much the larger investor pool were accredited investors. And just I mean, just as a byproduct of what that pool represents, too, it really is important to massage the message that’s going to them versus say, somebody that, oh, I’m gonna do this reg CF, and I’m going to put in the my cap amount, which is under like, 10% of what I would make this year anyways. So it’s not like a massive investment from the perspective of how much of amounts are actually being put into the project. And as a result, there’s a different perception, there’s a different component, or motivation for what element of control they want, and what their expectation is. So I really couldn’t agree with that point more that I mean, for all the projects out there that are considering how to angle, the language, the marketing, the legal, whatever it is, tailoring it to your investor base. And this ties right back to Paul’s discussion with all of us about testing the waters as well. It’s like, know, your investor base early and know well and curate that language as quickly as possible, because it’s going to be a massive component to your success.
Oscar Jofre 56:08
Well, you know, it’s refreshing to have that conversation like this. You know why? Because I remember, a few years ago, nobody could get that narrative. It was too convoluted you remember that? I’m already I think you remember that as well, in the early days of crowdfunding, which investor we talking about, and nobody could really define it. And this is really important for the audience here is that, you know, we’re not seeing the, and when, when we and companies say okay, no, it is there is no custody and you’re going no, there is you got to put it in the context, what investor base you’re targeting, that’s going to determine a lot of it. And can you mix and match? Of course you can. But then you need to understand what is it going to take to get there for whether it’s a security token digital security stable corner NFT. And, Marty, I know you’ve been you’re you’re now get on that right now with Danny, with David Lee and a few things like this. And the confusion I often see I don’t know if you see it as well. They get caught up on the naming of it. And I always go back to the basic, it’s a security. It’s either reg D reg A or reg CF. These are the legalities a, you know, what, what advice could you give them as well. I mean, you heard what Andrew said, on the investor side, but some of them are driven by the regulation. And yet they start putting all the other components to it. You know, just love to hear your thoughts on that as well. You’re on mute, but can everybody hear him? Or is it just me?
Andrew Bull 57:43
No, I can’t either. You know,
Oscar Jofre 57:47
you’re on mute.
Andrew Bull 57:50
If he’s just saying that he agreed with everything I said, Oh, fantastic.
Oscar Jofre 57:55
You know, Andrew, thank you. That’s an extra skill you have. I love this. Hey, guys, look at that we finally found a way to say it. Because you’ll come out to know, listen, it’s thank you so much this discussion is moving now. So as they said, we’re really trying something very new today. So we apologize to the audience today in advance. So it’s going to be so what’s going to happen right now we’re going to end the session. And it’s going to look like you’re going to go into this other screen, which will have a whole bunch of little tables on it. And you’ll see Annabelle you’ll see Marty page, you’ll see Paul’s and David Lee. So you can interact with each of them individually and going ask your questions there, you can turn on your camera, you can turn on your microphone, and you our guests, you can also type messages to them. And of course, do not worry you their contact details, as I mentioned before, except for summit that IO. So you’ll always have that. And we’ll be emailing that to you as well. And the session is recorded. So for Paul, David, Andrew Martin, thank you so much. I know the topic was a lot. It, I know it and don’t feel like it’s anything more than it’s evolving. Marty and I’ve been doing this for. I’m not gonna say because I don’t want to say how old I am right now. But we’ve been doing it for a while. And I’ve met Andrew not that long ago. And what I do know what we do share with the legal community today is that we have one thing in the forefront is we want to make sure you do it compliantly that’s number one. Number two, it’s safe for you the investors at large. And we want you to have fun with it, of course explore these new ways to raise capital. But don’t forget, at the end of the day, people are putting into investing in your company no matter how fancy the gadget is. It’s still an investment. And as long as you remember that you have a bit of responsibility. So we’re going to end the session. We’re going to go on right directly to the lounge. there’ll be a 1015 minute break there between the next session I hope everyone enjoys it don’t leave the next session will automatically start once the lounge part is done thank you everyone and we’ll be talking to you soon