What Impact Does Secondary Market Have on Your RegA+
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.
Co-founder & COO
Co-founder & COO
Joel Steinmetz brings more than 20 years of financial services experience to the Rialto team. Joel has led efforts in building trading platforms, algorithmic systems, as well as new businesses while at Citi, Citadel, Instinet and Liquidnet. He has been involved in numerous transactions in capital markets at Citi and Instinet, and has performed deal flow analysis, structuring, and strategic integration. His experience spans the universe of business strategy, data analysis, and technology. Recognizing the obstacles for issuers and investors in the private placement market, Joel saw an opportunity to leverage the founding team’s collective experience to bring efficiency to inefficient markets, inspiring him to co-found Rialto.
Director, Business Development
North Capital Private Securities
Director, Business Development
Jake Gallagher is the Director, Business Development at North Capital Private Securities. He is responsible for establishing and maintaining relationships with issuers, institutional and retail investors for North Capital's primary issuance brokerage business and their alternative trading system, PPEX. Throughout his career, he has worked on offerings spanning various sectors and exemptions including Reg A, CF, D, and S. He graduated from the University of North Carolina at Wilmington with a B.A. in Economics and Minor in Mathematics. Jake is a CFA Level II Candidate and currently holds the Series 7, 24, 63, and 65 registrations.
Oscar Jofre 00:00
Hey, good to see both you. You missed me, didn’t you?
Joel Steinmetz 00:04
I did. I haven’t spoken in a while at this point. I think I spoken to Jake more recently. I spoken to you. Yeah, we did Connect. Not too long ago. Not too long ago. Yes.
Oscar Jofre 00:30
Just give me one minute here to get properly set up. You can hear my little one in the background. So just one second. No problem. Okay, here we go. Well, good morning, everyone. And welcome once again to the KoreSummit webinar series. 2021. Another great topic today with two big hitters in this market, we are finally have we’re gonna have more and more discussions about this secondary market trading and the impact it’s going to have in the private markATS. So just to remind everyone, the format is always the same, we’re gonna have a conversation, we have two great individuals from two firms we run in secondary market ATS and we’re going to have a discussion about the impact of it. And then of course, we’re going to give you an opportunity to fill in with questions but otherwise we’re just going to keep going no presentations is just merely having a discussion and for everyone else obviously this is being recorded it will be available on YouTube Live or on our KoreSummit.io your website so first of all, I want to say thank you both Jake and yole to make it here this morning. I would like everybody to first if you could introduce yourselves and some information about your obviously want to keep this regarding the secondary market bought your registered secondary market ATS. Jake, why don’t we start with your travel?
Jake Gallagher 02:23
Well first of all Oscar really appreciate the opportunity to appreciate you inviting me on. You know, my name is Jake Gallagher. I’m a director of private secondaries at North capitals, PPEX ATS. We facilitate secondary trading in RegA securities reg, reg, CF. Reg D. Reg s. And we’ve been working on the ATS nowadays feels like for the better part of you two, two and a half years. So it was a long period throughout the regulatory approval process. And we’re starting down board issuers now. And you’re looking to partner with firms like work connects and, and we also and other ATS is in the hope so try to create greater liquidity and transparency in the private market. Via we’ve been a boutique investment banking firm for the better part of a decade. And we’ve solely focused on private securities. And we believe the secondary market was a it was an easy transition for us just kind of given our business in the primary market. But yeah, that’s a quick intro on me and the firm.
Oscar Jofre 02:44
Joel Steinmetz 03:35
My name is Joel Steinmetz, I’m the CEO and co founder at Rialto MarkATS. And our story is not terribly unlike the one Jake just described with North capital, we are involved in both the primary and secondary sides of the private markATS. We also had that long hole with the regulators to make sure that we can get our approval, which we got last April, to allow us to trade the private markATS in both traditional and digital form. We work with companies like North capital and others. And I think we both have a similar idea and saying, How can we find a way to change the private markATS, it’s for certain people, the people that are involved in it very much, so it might be not considered to be broken. But we feel that there’s great opportunity to expand it to get two new users to advance it and different types of assATS that are available in for trading. And there is a challenge in finding a way to make it work in the secondary markATS. From our perspective, we’re going to deal with only regulated securities break a reg D reg s, reg CF, anything that’s regulated, but it will have to be regulated because we feel that’s an important element to make sure that the ecosystem is able to Shift and expand upon itself, not necessarily fix things, certain things are not broken, but certainly to expand and enhance the opportunities within the private markATS.
Oscar Jofre 05:13
Great. And so I hope it you know, I’ve learned a lot the last row. Well, thanks, Jake, that conversation that we have recently. It’s been enlightening for me. And it was timely because I can come into this discussion, hopefully, to, I hope you all agree that if we can educate people what an ATS is, and the different perspectives, I’m not trying to put you on the spot on it, but both of you operate two different types of atss. So I’m Jake, if you could walk us through the journey on yours. What sATS it’s an 80 s register was FINRA, you fully licensed in all 50 states? But then there’s another layer that people need to consider when they’re going to use the PP PBX secondary market?
Jake Gallagher 06:04
Yeah, no, absolutely. So I think, you know, our approach is a little bit different than some of some of the other groups out there. And that, you know, whoa, you know, well, we are a broker dealer. And we, you know, we have dealt with retail investors and institutional investors directly on the on the primary side, or on the secondary side, we’ve started out is strictly institutional on the ATS. And what I mean by institutional is that, you know, you know, a retail investor, it can trade through PPEX is just indirectly. So we’re partnering with various broker dealers, we’re partnering with institutional investors, you know, the pensions, endowments of the world. But, you know, if, for example, the john smith wanted had purchased shares in you in a RegA plus security or in wanting to purchase additional shares, or wanting to purchase or perhaps sell his shares, he would have have to route that trade through one of our member broker dealers. So we’ve got, you know, broker dealers are onboarding platform and becoming members of ATS. And our our vision of and why we’re doing this is simply is just because our network, you know, we believe what we have a pretty large, you know, indirect network, just given the amount of offerings we’ve done on the primary side, it’s, it’s far larger, if we partner with other broker dealers, other atss other institutional investors who are going to have a far greater network. And we think, you know, by doing that approach, you know, that we’re going to ultimately reach more people get more eyeballs, and hopefully be able to create more liquidity. We’ve contemplated doing, you know, kind of direct to retail format. But that’s not something that we’ve decided on and right now, we’re sticking to our guns on strictly institutional and hoping to create really that network effect.
Oscar Jofre 07:59
So that’s great. And I thank you for saying that, you know, I, I’m going to be the first cheerleader for atss. We’re very clear and concise. And I told you that on the call, who you’re targeting, and how you can come into it, because there’s been so much ambiguity. And this subject, a lot of people jumped up and down. A lot of people are misleading investors that I’m going to be trading in this thing. And, and it’s just not the case. So Joel, I want to come back to you now, on the same question applies, you know, what sATS it and then we’re going to dig into a little bit deeper on the processes, and the issuers because I think that’s the next layer of this discussion.
Joel Steinmetz 08:36
If from, from our perspective, there’s a similarity and a difference to the way north capital does it, there’s similarities, we totally agree in the fact of getting air through partnerships. And that’s really the way you expand and where you get the most players in so that the network doesn’t have to be built, but it actually can be brought, not bought but brought. So that when you’re dealing with pipelines of of whether it’s transfer agents or lawyers or accountants that are coming in with pipelines of issuers, the issue is bring with them a decent amount of subscribers that allow the network to then naturally grow. We are targeting all kinds of investors, not only the institutional investor, but also the retail investor and doing so directly. And the reason one of the reasons we’re doing that is again, similar to the way Jake described it, finding a way to get liquidity is is of the essence, everyone needs to find that way of getting liquidity. We feel that one of the best ways to get it is to make sure that the players are diverse enough that they’re all thinking a little bit differently, and therefore they’re coming in with different interests. So you know what, I’ve had the experience and building at this is a ninth ATS I’ve been involved in and they’re all On the traditional side, one of the earlier ones was a crossing network at instant. And one of the problems that the internet crossing network had in the beginning was it was solely focused on really one type of customer. And wouldn’t you know, most people were coming in on one side of the trade, because they’re all thinking alike. And the key is to get the diversity of investors to make sure that people are thinking differently. And therefore, you’ll have buyers and sellers and more aggressive ones and more passive ones. And that that creates a market. So we look at it and say, we’re going to target not necessarily the end user investor, we are going to service the end user investor, but we’re going to target the pipeline’s that will enable those investors to reach the liquidity, and they’ll be able to get there directly. But the the key, as, as Jake was saying, is to make sure that you have partnerships that enable all of those liquidity partners to bring more and more players to the table.
Oscar Jofre 11:02
And that’s pretty interesting that the little nuance here that I’m just gonna hope you’re okay. Both of you is that the the two at both North capitals, PPEX, I hope I got it right. Jake PPEX. Yep. Okay, good. And then the Rialto MarkATS, the distinctive difference, they’re all going to help the individual investor and Jake is approach, they’re still going through other broker dealers, but the investor is going to need to deal with a broker dealer. In this one, you’re still going to be targeting the broker dealers, but the investor can come in by themselves. That’s really the two distinctive difference. And nothing. What I like about this conversation is that none of us are saying we’re trying to remove the the, though not so much the layers of the regulatory elements that are already in place that can help bring secondary market a lot. Would you agree with that? I mean, in general,
Joel Steinmetz 12:00
yeah. So So I think the SEC, the regulatory environment is essential for the secondary market to be successful. If you’re going to get the players in, and I think the institutions are getting there, and we’re just at the we’re in the first inning of that game, the institutional players are going to get bigger and bigger in it. But the comfort level needs to have a layer on top of it. That’s a regulatory layer.
Jake Gallagher 12:29
Yeah, no, no, I would echo that. I mean, if if this is the wild, wild west, it’s it’s hard to gain traction, just because there’s, you know, there are players that will play Sony bids, and you want to make sure everything’s regulated from the securities or trading the processes and how the ATS is operated in order to create really that trust and credibility in the market. And you know, by creating that trust and integrity, and we can hopefully drive this market forward.
Oscar Jofre 13:00
Well, you get the reason there’s a smile in my face, I’m going to tell you, okay, I am not shy about how I feel about ATS, because I was one of those few and I am going to admit it I it’s not so much that I jumped on the bandwagon I believe what they were telling me, I’m not here to describe it. But I know that we all got excited what we said three years ago, and we heard we weren’t. We weren’t asking the right questions. I’ve learned so much from people like yourselves, Jake, and you’ll and Sherry, that I now know, the questions to ask, and I’m just one person, right. And what I’m hoping to unravel today with both of you, and you’ve been very kind, and in our previous meetings to educate me, because I think if we have an educated market, more will come to secondary market better prepared, rather than nobody told me this. I wouldn’t have you know, nobody wants that kind of experience. So, but we’re gonna come back to the the whole process. But obviously, the topic is the impact. I mean, you know, it I’m sure all of you have met David Weil, that mean, and the people who were part of the JOBS Act. I remember in 2012, when somebody actually said they were liquidated, we everything was saying it’s too soon the you know, there’s no, we need to get get get the rail started. But now, you know, nine years later from the signing of President Barack Barack Obama, bringing the jobs back and look where we are where we’re finally having this discussion, and people need to understand nine years. It it’s taking that time for, for everyone to understand how to do it first This had to happen before, you know you couldn’t have the ATS before you had this and now we’re here. But so I want to I want to ask you both individually how you feel the impact will happen. Obviously, you have experienced from the institutional side, I want to go through the impact for them the accredited and most important to me, I think it’s the 233 million Americans that just never got a chance to participate. So I’ll put it on you Jake first, and then we’ll go to you, Joel. And this, I think it’s an important part of the discussion, that just I break it down by investors, because that is the way we are right. So floors yours.
Jake Gallagher 15:24
I mean, I would say probably the biggest impact that you know, that a secondary markATS gonna have on RegA plus issuers is, is really the marketability. I mean, that’s, you know, ultimately, the reason you do a RegA plus security is to be able to raise money and hopefully favorable valuations. The end, you know, by and beyond to reach retail investors, we, you know, it’s having that liquidity out soon is key, because, you know, there’s plenty of retail investors that, you know, for one reason or another investors in general and retail institutional, there’s always going to be that percentage of investors, whether it’s up to 20%, that, for one reason or another new fail to judge their need for liquidity correctly. And there’s going to be both people that need liquidity. And right now, the process is there’s there are firms out there that will, that will buy secondaries in name, typically it’s, they get a pretty good deal from an investor because they need to get out. And hopefully, by providing this liquidity, it makes these offerings more attractive to the greater market. And the second part of that is a lot of these a lot of groups that are issuing numerous RegA pluses, you know, they’ve got investors that want to get in on the last one, but they couldn’t, because they were oversubscribed, in particular, in a lot of these series LLC structures. And there’s going to be that five to 20% of investors, like I mentioned before, that needs that liquidity, and then you’re going to have that investor that didn’t get in on it, and will hopefully want to buy through the secondary market. And I think overall, it really just increases the overall marketability of your Reigate. If you are able to provide a potential little liquidity solution, obviously, nothing’s ever guaranteed in this world. But by having that potential liquidity solution, I think it makes you far more marketable. And, you know, hopefully, you I think rate lowers the cost of capital and just given that there is less liquidity risk.
Joel Steinmetz 17:36
Yeah. So I think there are basically three main components as to why the secondary markATS have great advantage. The end, and Jake touched on certainly two of them. The first one is the ability, even from the capital race side, to have an exit strategy. We know that there is a cost when you can’t exit. And if you are investing in a certain security, and you think it’s going to go up 10%, but you’re not going to be able to get out unless you give up 6%. On the downside, the investment is a completely different investment. And having a plan having platforms that allow you to get out of those securities to have an exit strategy, a monetizing strategy is essential for any issuer to speak to their investors and raise capital. It’s just another sales point. The second part of it is that for existing that’s for the issuer. For the existing users, they have an ability to now monetize, an existing user now has a platform upon which they can go to attract some, some form of liquidity from the issuers perspective, it also gives them an advantage in that they can get other investors in a secondary market. I think Jake was touching on this as well, that it’s not just the people that first invested in your company. But now you’re able to expand by going into the secondary market and having other people they might be replacing the first one’s Buying and selling. Well, they might just be additional additional investors by taking part of the shares that were offered, or originally sold. But there’s a third one, I think that’s also very important, particularly for RegA companies and series, issuers of RegA companies or ones that are just issuing small amounts at this point and have growth opportunities. And that’s brand recognition. The fact that you are on a platform, and it’s not just your users that know who you are, but actually a broad range of users that are maybe not invested in you but they see your ticker flying across their screen every day. Or they know that you there’s an availability to buy and sell your stock and they start looking into it. When you come out with that next RegA next year, two years, whatever it is, there is a much larger audience that you can attract Simply because you’ve created some form of brand recognition. And that should not be underestimated it also a fourth element, which I want to touch on, which is part of the branding, is the empowerment aspect. Now the issuers have the ability to be empowered to get their investors. So if there’s many of you know, through KCX, you are able to create this micro site. So that all you need to do is draw people to your area to your website. And you have now empowered yourselves, to get issuers to have people trade and to get investors to have people trade in that security, all through the impairments that you have within your own website. And those are important elements of what a secondary market can deliver in the entire brand recognition side.
Oscar Jofre 20:54
You know, your that its I am. I’m delighted and I’m sure Jake, I’m sure the it’s the same tone and, and aspirations that we’re noticing that we’re it starting right from the beginning, it’s the empowerment of the company, but we’re continuing that journey, empowerment of how the capital is raised in an efficient manner, how it’s managed. And now we’re talking about secondary market trading. I’m just excited that we’re real people with real, you know, real licenses, and you can hear my little one in the background saying, Yes, we got to do it, even for the little guy. Um, it’s, I think it’s important, I think everybody needs to understand that it’s, it’s not just an isolated item, you go there to dump your shares, or it’s, I believe it’s part of an overall strategy I’ve been using this a lot lately is a lot of intrapreneurs. Sometimes don’t tell you, the lawyer or everybody everything in fear that if you tell them too much about what your strategy is of capital raising, they may not want to participate now and wait for later, right? There’s some pros and cons. I’ve been of the opposite opinion, I say, Hey, listen, you’re coming into this deal. This is our strategy. This is our next race. And eventually, this is where we’re going to learn. This is our road. Here it is. And I feel it, you set the word, I feel empowered by it. You know why? I don’t have to worry about whether I told you or you something different. I told you all the same. We got two VCs on our round. We didn’t get a lot of them. But the ones that did know exactly what I’m doing next. Exactly. I’m doing a RegA. That’s it. I’m doing a RegA I’d never hit it. And I’m offering you secondary market trading for your securities. That No. JT said, nobody’s promising that the venue will have everything. But what we’re now giving you is the venue. I think that’s it. That’s the piece of empowerment that needs to play out here that I think is really important. And
Joel Steinmetz 22:59
I think speaking, I’m sure Jake would agree with this. And by giving you the venue and it’s not perfect, we’re asking you, users to help us. We’re we’ll both we both have large organizations behind it, to make sure that we can fix it, or build it or enhance it or whatever it is that you need. Then once we’ve delivered the venue, now you’re empowered to help us build it further.
Jake Gallagher 23:29
Yeah, no, I mean, I would echo that. No, we’re always looking for feedback from users. Because ultimately, you know, it’s the users that are going to drive this market, not us. Right. And so if we’re not taking feedback from them, and trying to optimize in in better our processes and in our interfaces, then yeah, I mean, then the market won’t thrive. And so yeah, I completely agree with you on that.
Oscar Jofre 23:55
Yeah, reminds me of the early days of any of the online funding in work, the kind of platforms we see today, before it was just sort of put a lipstick on it, get them to login. And, and over time, people have recognized they’re listening to the audience, I need to add this, I need to add this. And that’s part of the journey. And when I look at any type of exhilarate element to accompany like an ATS, how do we make the journey not only good for the BD, broker dealer story of the company, the issuer, and then of course, the most important person, the investor, the one and then of course, there’s another element to this that we we often left leave out, but we can’t anymore. And that’s the transfer agent. This is a for secondary market. These are the four key elements for that transaction to be fluid. Of course, the money I think goes without saying but for the transaction to be done in an efficient way. Because that’s really what we’re talking about now is how do we make it efficient enough so we can transact. Otherwise, we’re back Where we were 10 years ago, and nobody wants that. So, Jake, you and I, we went through this discussion. And I want to come back to that now. And that is, so the the being an institutional side, those ATS, and in the market, how did you know, obviously, you’re targeting the broker dealer, how how, how deep is, you know, North capital going to get involved to make sure that the investor, the end user investor has a component in this journey, obviously, knowing that, at the moment, you’re coming in, right to the BD side. Just wanted to hear your thoughts on that.
Jake Gallagher 25:43
Yeah, no, absolutely. So we have built out a suite of API’s that the broker dealer can integrate, and a lot of the groups that we work with the brokers, I mean, they are working directly with the, the in platform, right, that these investors are working with on on the primary race. And so you know, these platforms and the brokers are able to integrate the API’s into their existing platform, and to be able to show kind of what orders are available for the investor to be able to place trades, they’re just not they are placing it, an investor can place a limit order directly in packs, it’s just not on PPEX.com it’s on ABCco.com that they invest in the RegA into the RegA plus security or it’s on BVA.com, right? The answer they are able to, to it is an indirect direct relationship, if that makes sense. where, you know, via the API’s, they are able to place those trades and then do essentially the broker is, you know, reviewing approving the trades. And then that’s getting matched to our system, we’ve got the immune system built out in the reporting with or for smooth regulatory reporting, to make sure we’re covering all of our bases. And, you know, to your point of where the transfer agent comes in volved is, you know, a lot of times that the issuer is already integrated with the with the transfer agent, and they’re able to pass information via our API’s to the transfer agent, or the BB is integrated with the transfer agent. And they’re able to do the same, you know, as a view as the BD on many various RegA plus offerings, we knew we were kind of hands off with the transcript in most scenarios, but the issuers were readily they were readily integrated via their own platform. They and so were you trying to Don’t, don’t talk about it earlier, empower them to if they’re already, you know, connected to transferring to, like, We’re not here to tell them who to work with or who to integrate with and not to integrate with you, we want to kind of we be our API’s, we want them to be able to plug and play. And so they can kind of work out work it out, not necessarily on their own, but not having to change their processes already. Is this a matter of one additional kind of clip on items, so to speak?
Oscar Jofre 28:13
Sorry, I had myself on mute there before I started talking. So no, that that that’s great. I mean, I’m I often I often wondered, I mean, to me, the investor, because I’ve seen it I this is what I saw on RegA. And I often share this with everyone, because it’s important for all of us to understand what happened on the primary. And so for those on the primaries on I’m just picking on one regulation, RegA. Why? Because that’s the one with the largest crowd that could have a really good effect on secondary, both realtors and North capital is that this investors coming in putting in 500,000 10,000, whatever. But when they’re going through that journey of that investment, and they click the submit button and all that there’s a lot of darkness for them, meaning they are asking. So you know, we’ll we stood in the backside for many, for a long time saying okay, I thought it was taken care of. And as it turns out, they were completely in the dark. And that darkness created kind of this confusion, anxiety. And some of them were a little bit more attuned to it. And I wonder now what I’ve been thinking more about always, I keep thinking about that end user, because that end user experience to me is everything about anything, whether they’re buying or trading or transferring the the more the lighter is so and that’s a part that I think it’s one where I walk away from a lot of ATSs is where it goes only this layer, and after that, it’s sort of like it’s on your own and I go, Okay, I got to build something. So, Joel, I mean, you and I’ve had what you mean share in another. I’ve had many discussions on there. So obviously you You are focused on on the end user component to that. And to make sure we have luck. But just be interesting. There are two correlations here two different types of ATS is that I think it’d be good for people to kind of understand the two differences and the two different value propositions for the end user.
Joel Steinmetz 30:18
Yeah, there’s, there’s no question there’s a, you know, a different approach in the micro level. But actually, I think on the macro level where we’re aligned, you know, I think North capitalism, realtors are both going towards the same end goal, which is, how do we empower the ultimate user to be able to get involved and make their decisions on their own, whether you’re doing it through some institutional capacity, or you’re doing it directly, is, is certainly a difference in nuance difference and an important one. And it’s, it’s necessary to understand the differences. But regardless, it’s the other parts of the ecosystem that come into play, and the connectivity to all those other parts of the ecosystem that’s essential for success. So from our perspective, you know, onboarding, making sure AML and KYC, anti money laundering, laundering and know your customer issues are not only put into place, but scaled is an essential element, because we’re not onboarding just a few customers that then have a whole load behind it, we’re unloading the end user. So we have to put some focus on the scaling part of it. It doesn’t mean that others that are involved in this don’t have solutions for that, it’s just built a little bit differently. Similarly, when it comes to the transfer agent, and the trading that’s done, so we’ll we’ll be messaging that transfer agent through the end users account, as opposed to maybe the broker dealer account. But regardless, the essential elements are making sure that all of those component parts are in place, and on as we call it a reality of the rails. So that wherever you Come on, and whatever station you Come on, on in that railway system, you can connect to all the other people in the other stations. And again, whether it’s the end user or not the end user, you still need the same results.
Oscar Jofre 32:21
Yeah, I agree. It’s the I think what’s going to become critical more so in ATS is in order for the crowd to come in or not just the crowd, because we’ve seen institutional I think that what is clear is in because both of you have been doing this for a while, is that institutional has been doing secondary market trading for a long time. There’s no way it didn’t you your your say you built what nine, Jake, I don’t know how many you’ve been involved. I’ve done none. So I’ve just been an observer, but it means it’s been happening, but it’s only been one layer investor. So the impact here is that there could be a new form of investor that could have an impact on the secondary markATS that we have not seen before. Whether it comes in through the you know, the same participants, the the broker dealer or directly, but there is a BD side to it. And I firmly believe that the key to the success of all of that will be the same fluidness that we’re paying attention now, on the primary, and in the middle is going to be the secondary. I’ve I believe we’re going to it just my my personal belief now is that the what I’ve been watching on the primary has been a where companies get certain things, because that gadget looks good. I need that gadget with that gadget with that gadget, and I put it together, it gives me what I need. That may not necessarily be the one that gATS me to the finish game. We’re now learning that that’s not going to get you there anymore. Something different. And that’s part of that evolution of movement that that I see. And it I think it’s an important element that I think companies need to consider is that as they start their journey of their capital raised, where is the end game? Well, maybe it’s both, but still, how are you going to get there to make sure that either one you take, you have the tool sATS to provide that to investors because otherwise what’s going to happen is this. The we’re gonna see a crowd who’s getting bigger and bigger year by year in year out who is going to understand that if they shout loud enough on Twitter and Facebook, people will listen and that will happen that you said empowerment it can go the other way we’ve seen it right. Don’t want to bring politics into it. But you know what can happen to a crowd, right? It can be routed out and you know people get pissed off. So in So it’s I think I bring this discussion, because I, I’m a firm believer that if we don’t see it that way, with that, in that respect, we are going to think that Oh, yeah, it’s all happening through. But because we’re relying on the other party to do that part, I’m eight, eight, it will hurt us all. Because the way the journey of an investor, what I’m noticing is that the associated is one.
Joel Steinmetz 35:31
And I think, I think it’s kind of you know, I don’t mean to simplify the trivialize the analogy, but when you’re going on a highway, the idea of the highway is to actually get you to a destination. If you build the highway, with no exit ramp at that destination, then the highway is useless. When people are coming in to invest in securities, they have a destination, it’s not just that I own this stock, it’s that this is going to make money for me. And if you can’t have a solution that monetizes it and exit ramp, when you are trying to monetize, then you don’t have the solution, right, a highway without an exit ramp leads to nowhere. And we need to build the highways with exit ramps, and the secondary markATS are very often the or we think the most effective and efficient way of dealing with the exit ramp.
Oscar Jofre 36:28
Jake, you were gonna say something sorry, but going? Oh, no, no. Yeah. I
Jake Gallagher 36:33
mean, I would echo that. I mean, ultimately, you know, the ATS here is, is to provide that liquidity solution, if you there’s the investor that needs to get out, or the investors that that has been there for a while and wants to monetize. And that’s our goal is to be able to, to bring in as many partners as possible. And, you know, often the times that the partners we’re bringing on, were you the brokers that you were working on the initial primary raise, or, or were involved, maybe it’s, you know, as a introducing broker, the answer, we think, by creating that, you know, going up familiarity route, where they’re working with someone that they’re already comfortable with, it’s just being routed through PPEX kind of in the background, you know, we want to provide as much transparency and we, you know, like to like to think we’re doing that VR API’s. And that gives the user a little bit of insight into exactly what what’s going on with their order, and hopefully, will route their order and ultimately get it executed to provide that liquidation and monetization event.
Oscar Jofre 37:46
I keep muting myself, so you guys can get to hear my little riled up. I’m sorry, everyone is, well, I’m not gonna bother. So he’s teething, you know, seven months old, you ever want to feel the pain? There it is, you know, he’s coming, he’s getting them all. So thank you, everyone, for your patience there. Um, so, let me let us go back to an element. Now the, on the secondary that we we don’t speak about, but it is important. The one is the impact. And, and for the assurances for the for the investors when secondary can happen. Obviously, there’s a number of undertakings that a company needs to do. So one, obviously, Jake, they’re going to come to you and sign up. And that’s part one and yours. And then they need to do something else. There’s a second element that up until recently, it was left out of the conversation how that happened. I don’t know. But we’re definitely going to talk about it. And that’s called Blue sky and the securities manual. So if Jake, if you could start us with that, and then y’all, I’ll be coming back to you on that as well.
Jake Gallagher 38:55
I guess yeah, no, absolutely. I mean, that’s a big part of the equation. Oscar, I would definitely agree with that. And, you know, one of our solutions is we’ve, we’ve made an investment into a firm called guard, who’s run by a guy named Woody Nice, our CEO Jim downs on the board there. And you know, that that’s our kind of our first referral source. If for blue sky filings and regulation, if there’s an issuer that already has that lined up to another provider, then we’re certainly happy to use them is bright, but that’s kind of our kind of first initial, you know, referral source, just given how close we’re working with them. And yeah, I mean, I would agree that that’s a big, big key to this RegA trading market is that you’re going to need to take get that taken care of just make sure number one, that you’re in compliance and that’s part of you know, being regulated in a trying to create that trust and integrity in the market.
Joel Steinmetz 39:58
Yeah, there are there are you know, To your point, Oscar, there are several things that have to be taken care of, aside from, you know, signing up and onboarding yourself to a an ATS. And you know, one of the lead ones, whether you want to call it a an attorney or just the legalities of it, it’s very important for issue is to recognize that there are legalities that have to be dealt with blue sky is a is an important one. And there are as everyone knows, there are the seven states that are particularly difficult and require broker dealers to be involved. That’s, that’s an important element. Those are not small states, they encompass a significant amount of potential investors. And if those end users are coming, are wanting to invest in your security, it would be a shame to sort of let that go by the wayside because, you know, you haven’t dealt with the blue sky requirements. There, they cost some money, I don’t know, you know, how much whether it’s a lot or a little is all relative. But nonetheless, just dealing with all of those regulations and the legalities of making sure you know, all your ducks in a row as an issuer. The broker dealers will do a lot of that work for you, they’ll do a lot of the vetting, they’ll do a lot of the AML KYC and making sure things are happening. But to assume that you can do this without really some real legal guidance on some of these issues. I think it’s a bit naive, it’s very important to make sure that you have the partners in place. And as Jake is saying, with with their with a group of guard they go to, there are I’m sure there are others that they deal with just like we have a group of others that we use to help us assure you that the issuer is going to have everything that they need. Because we want to just make sure that it’s easy for you. And it’s a singular experience to make sure all of that is covered.
Oscar Jofre 41:58
Yeah, that’s it. That is a good point. I mean, the we, obviously clearly secondary markATS going to get started. There are other there’s Gard there’s trade check on issuers. But what needs to be clear, I think, for clarity, because I know this comes up a lot. That was this kind of I want to call it a gray area. So make sure you go Oh, I feel that I can just create an intranet. Let my shareholders trade. No. Okay. So if I hear I can put my stuff on Craigslist, and I know so it’s, it’s very black and white. Now it what you need, these are two very important elements that you need to consider. So what does that mean, we’re telling you what you need to have for the planning, no different than when we tell you what you need for your raise for RegA, reg, CF and reg D, we tell you all the things audited this and that this is just another part that you need to include in that roadmap of your capital raise if to the point of what you all said some time back. You need to think if you’re going to think a liquidity, you need to put that into action, and you need to plan for it rather than Oh, my God, I need to do something and I didn’t know what do I do? Right. So it I think it’s important that people recognize why there, there is this requirement. And it’s interesting. And I’ve looked back at every webinar that I’ve done on secondary market, when three years ago, not a single person ever spoke about blue sky, not a single person ever talked about the securities manual. And it’s amazing. Do you know, I know why all of us were working in the background building stuff, but nobody ever brought it up. And and not only that they didn’t even weren’t even aware of it. So that awareness is opening things up for everyone. That is, again, the only way we can have impact. positive impact is through education. So people know and sign up properly. To the different faces the same way Jim [uncertain] does, Jim, you know, when Carter went live hidden going bashing, just Hey, Congratulations, guys. Watch your language, you’re not an exchange secondary markATS and that was good, you know that that was him. You know, educate everyone. Do not use the word exchange. Something that simple is one that I spent a lot of time on where people keep thinking that and I you know, we’re gonna I want to hear your both your comments on this because we keep using the word ATS in secondary market, and their audience here are not hearing the word exchange. So Jake, I mean, there there is a distinct differences between these two.
Jake Gallagher 44:48
Yeah, I mean, that’s cool. I did it is a minor difference. But nonetheless, it is I mean, we are we are not an exchange. We are not New York Stock Exchange. We are it’s you know, it’s is a very closed market. But yeah, it’s a minor difference. But nonetheless, we are not an exchange. And if you hold yourself out to be an exchange, it is misleading investors. And while we accomplish many of the things that an exchange does, we are we are so not qualified or registered as one. So holding ourselves as an exchange would be misleading investors and pointing in the wrong direction.
Joel Steinmetz 45:30
And those those terms sometimes that use not only the word exchange versus ATS, we too are not an exchange or an ATS. But sometimes there are other words also that are, you know, slight differences, you know, we don’t talk about listing your securities listing is an exchange term. That’s you don’t list your securities you place your securities on on our ATS, but don’t list them. But there are these words that, you know, lawyers get paid a lot of money to make sure that they’re correct. But nonetheless, as far as the functionality is concerned, for both issuers and investors, it accomplishes the goals that you need, and allows an issuer to have their securities traded or matched on a platform, and it allows investors to come into that platform in the secondary markATS and buy and sell. And those I guess, are the main functions of what these matching engines will will perform, which are quite similar.
Oscar Jofre 46:33
Yeah, but similar is one thing, but it and using the wrong terms can be misleading, even to the general public who only know Oh, what are you trading on NASDAQ? Is that what that’s like? Oh, yes. Similar? It is, I find that that we need to break that the same way that private chairs, public chairs, right? Same thing. And I think I, that the audience today needs to really understand why we can use that word. And I see Jim and I see all of us constantly giving heads up to those who do because I’m sorry, gentlemen. I mean, the reality is that, here we are, and I’m sure there are many ethical other players as well. But there are those that are not. And those are the ones that are going to hurt North capital and reality will because you’ll have to work twice as hard to educate the market as to why you were different. Because once people lose money, you know what it’s like, right? They paint it all under the same umbrella. Oh, I don’t want to touch anything with blockchain. Because it’s a scam. No, not everything’s a scam on blockchain. It’s what they did with it. But again, it’s gonna take a while for us to, to flush ourselves out of that. And as long as the SEC keeps targeting this environment, so I’m, I’m glad you both share that in the differences, why the terminology will never be used as an exchange. A thank you for that education. It’s not a listening. It’s a placement. Okay. See, I learned something. And my bigger education. Now I know what it means. When people say it’s institutional grade, secondary market, which means it’s still retail. It’s not saying that retail and that, the only difference is that, as an investor, I will go through my broker dealer to get to that trade. Other than that, it’s still secondary market trading, other private shares. And so let’s, let’s look ahead a little bit. We’re now getting started. We’re just getting, you know, think about 2012. And the secondary market, where do you think we’re going to be in three to five years? As far as momentum? What do you think is going to be the key indicator that the impact is working? Jake, I’ll start with you.
Jake Gallagher 48:59
I mean, I think, you know, we’re starting to see a lot of, you know, groups join our platform, and we’re consistently trying to build new partnerships with firms that have similar visions. And I mean, I think, you know, a year and a half, two years ago, maybe we were a little ambitious on where we’d be with the ACS. And and I think, you know, the regulator’s kind of put put us, gave us a new perspective on it, but we are us steadily climbing and trying to ultimately get to a place where people can trade without taking a 10 15% haircut on their security. And I think that’s ultimately where we’re gonna get maybe it’s, you know, in five, six years, maybe it’s maybe it’s sooner, I sure hope so. You know, we think by partnering with various firms that have their networks that are already active in these securities on the primary side, but secondary side will be really a smooth transition. And I think we’re going to get to a place where you Can you actively trade your securities that may not get matched, you know, within five seconds like it does on E trade, but maybe your mats within you know, a few days or even a week, in, you know, the second part of that is really kind of the settlement and clearing process, I mean, in secondary trades. Now, you know, when you’re sending stuff to the issuer to get approved, and then it’s update on the cap table, whether that’s internal, or they use a capital management system, or they use a transfer agent, that process now can take weeks to a month, just even once you have an agreement on price and size, just to get it cleared and approved of the issuer and transfer agent, it can take weeks to months. And I think, you know, in the coming years, we’re gonna hopefully be able to get that down to, you know, days, if not, you know, we talk, you know, it’s so you know, we’re still working towards that goal, obviously, but I think in the coming years, that’s where we’ll be.
Oscar Jofre 50:59
Joel Steinmetz 51:01
So I think the the goal is to increase the breadth of investors who have access to private securities, and the depth of investment assATS available for investment. If we can do those two things just increase the amount of people that can actually get into this, and the types of securities that one can get into. That would, that would be where the market, I think, is going in the next three to five years. I think it’ll get there in those in that amount of time. The things that to keep in mind, and when you know it’s succeeding, I think when we start seeing a lot of real big time, institutional players getting involved, when you start seeing the players who are right now all looking at it, they all have departments that are considering what we should do, etc. But they’re not there, maybe they have a toe in the water, but they don’t even have the whole foot. And we’ll start seeing that when we start seeing those players come in, when we start seeing issuers that are maybe a little bit larger coming into the plate, maybe it’s RegA, maybe it’s reg D, maybe they’ll do serial, and 50 million rather than serial, and 5 million. I think those types of things are going to be important to note the success. The last piece of when you’ll know that it’s being successful is when prices are starting to get driven down. And that’s not that prices will be driven down because of demand. but rather because of efficiency. As this gATS more and more efficient, as we can start creating and taking down boundaries and creating better pipelines to and fro various areas, the costs will will come lower and lower. And that kind of efficiency means that the business is growing well enough. I think those two would be great key performance indicators in determining whether we’re reaching the goal of increasing the breadth of investors and the depth of investments.
Oscar Jofre 53:05
That’s great summary guys. And you know, you guys give me an idea. And I hope you’re both agree to come. And if you one thing that we did is we started touching on a Jake and I liked it. You know, I’ve come up with eight different ideas come up because I think about sometimes the questions people ask. And one thing that just stumbled on me is how does secondary market work? How does it trade? Actually? How does it actually work? Are you guys both okay to come back? And we do something just on that? I mean, it because it is so interesting, because you started talking about settlement Dagon. At that moment. It just clicked into me people don’t even think about that. Right. Yeah, in, that’s gonna be a great one. So I’ll be inviting that. Thank you for that. I do agree with you, on your point your that some of the indicators will be when institutional gATS in? Well, I get some good news for you. I mean, one of the things we’ve been waiting on RegA is when an institutional would take a big enough chunk, that people would pay attention and that just happened on a on a RegA deal that raise $50 million, it was a very significant chunk of the often was done by an institution. So which means that if they’re seeing it on the primary, it’s definitely You’re right. I firmly believe when the when the bigger dollar amount can see it and understand it cost efficient, and meet all their compliance requirement. Listen to this everyone compliance requirements, um, which is usually the bottleneck, but we can obviously we can all address it. It will be the key. I think that’s going to be the indicator. We’re calling 2021. The year of regulation a level up and it already started, not only for the size of the capital race, but the time of investor that’s now coming into it, which would fundamentally change the secondary market trading. So, this has been an exciting conversation for me, because two years ago, I wouldn’t have this one with you. I when I’ll be honest with you, I be asking so well, you know, what kind of companies can I bring? You notice that it’s not about that anymore? It’s, it’s really no longer, you know, I’m raising 20 million, should I? It’s not that anymore, we need to understand what the what a secondary market ATS is, how does it work, and I’m gonna bring you both in, we now know the impact for the investors institutional high net worth retail investors, it’s here. So I want to be very clear. North capitals, like right? best brands, say it’s here. And reorders live, it’s here. It’s good. And with experience providers, I rarely ever do this in education. But education is part of it is people go Where Where can I touch and it’s real, it’s real. You can contact reach us, you can go to Koresummit.io website and get the information. And I’m going to include another topic of this because I think that it’s going to be the topic of mine. Now, how does it work? How does it work so people can visualize it? So people don’t get it confused between the public that exchange elements. So, Jake, Yo, I want to thank you both today. I mean it and, and my little boy, Maximus he Thanks, you too, for being patient and everyone else who came in and those listening in. Thank you so much for coming up to the course on a webinar. It will be available to you on YouTube or Koresummit.io. We do have another one this afternoon at 330 this afternoon. How to Can I use my IRA for online private companies. So it’s going to be a great topic. Thank you Have a great afternoon. It’s been a phenomenal week. Take care. Thank you.