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SEC Declares Meme Coins Outside Its Jurisdiction: A Turning Point for Cryptocurrency Regulation?

Posted on by Marty Tate Tags: , , , , , ,

On February 27, 2025, the U.S. Securities and Exchange Commission (SEC) made a significant announcement that has reverberated across the cryptocurrency ecosystem: meme coins, or cryptocurrencies inspired by internet memes and viral trends, are not considered securities. This ruling has sparked questions within the world of securities regulation and sparked new debates about the role of meme coins in the broader crypto market and the future of cryptocurrency as a whole.  This was not something that most people felt was a priority and could arguably lead to more uncertainty about what constitutes a security and will likely lead to further distrust of the crypto industry.

Meme Coins: From Joke to Risky Speculation

Meme coins first emerged as a novelty within the crypto space, with Dogecoin leading the way. Launched in 2013 as a joke inspired by the “Doge” meme, Dogecoin was initially seen as little more than a lighthearted take on the world of digital assets. However, over the years, it has become an influential force in the crypto world, inspiring a host of other coins based solely on internet memes, cultural references, or even the fleeting nature of social media trends.

While many view meme coins as a way to capitalize on digital culture, their fundamental issue is glaring: they lack inherent utility. Unlike traditional cryptocurrencies such as Bitcoin or Ethereum, which offer decentralized networks and real-world use cases, meme coins are primarily speculative assets. Their value is largely driven by hype, media buzz, and the ever-changing landscape of online trends. Unfortunately, this often leads to pump-and-dump schemes, where the value of a meme coin is artificially inflated before crashing, leaving investors with worthless assets.

The launch of high-profile meme coins, such as the self-proclaimed $TRUMP coin (purportedly inspired by Donald Trump’s second inauguration) and $MELANIA (a coin named after his wife), underscores the absurdity of this trend. Even more bizarre is the creation of a meme coin based on the dog of Binance’s former CEO, CZ, called “Broccoli.” These projects, while entertaining, highlight the lack of serious purpose behind meme coins, raising concerns about their long-term impact on the credibility and stability of the crypto industry.

The SEC’s Stance on Meme Coins

In its February 2025 ruling, the SEC made it clear that it does not consider meme coins to be securities, as they fail to meet the criteria outlined in the Howey Test. This test, which determines whether an asset qualifies as an investment contract and therefore a security under U.S. law, requires an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. According to SEC Commissioner Hester Peirce, meme coins do not fit this definition because they lack any real business purpose or investment promise. Instead, they function more like collectibles, driven by market demand, social media hype, and pure speculation.

Peirce, who heads the SEC’s crypto task force, acknowledged the speculative nature of meme coins but emphasized that their lack of intrinsic value and business purpose places them outside the SEC’s jurisdiction. As a result, transactions involving meme coins do not require SEC registration, and the commission has no immediate plans to regulate them as securities. 

The Dangers of this Ruling

While the SEC’s ruling has provided some clarity for the crypto industry, it has simultaneously muddied the waters about what constitutes a security.  While the promoters of Meme Coins and other cryptocurrency issuers and promoters have argued that the offering of these tokens does not constitute a securities offerings, the SEC previously held that these offerings were securities offerings because and should be regulated as such.  While the intention of this decision may be to limit regulation of only Meme coins, this ruling could open up a pandora’s box of unregulated securities activities and unregistered securities offerings.  Furthermore, this will undoubtedly open up the floodgates to potential fraud and scams, which will leave purchasers without the protections of securities laws or recourse against the issuers.

The Dangers of Meme Coins for the Crypto Ecosystem

In addition, the ruling raises important questions about the long-term implications regarding the future status of what constitute of meme coins on the broader market.  While meme coins may provide temporary entertainment or speculative opportunities for certain investors, they pose significant risks to the credibility and integrity of the cryptocurrency industry. At their core, meme coins represent the antithesis of the original vision behind cryptocurrencies, which were designed to be decentralized, transparent, and serve as viable alternatives to traditional financial systems.

Unfortunately, the current meme coin trend seems to be more about gambling and speculation than about fostering legitimate innovation or providing tangible value. Many meme coin projects are driven by media hype and social media trends rather than real-world use cases or technological advancements. In some cases, these projects are used to manipulate investors, with developers engaging in “rug pulls” where liquidity is drained from the coin, leaving investors with worthless tokens.

Even when meme coin creators appear to have legitimate intentions, the volatility of these assets often undermines their credibility. Projects are frequently abandoned, manipulated, or exploited by early investors who benefit from pumping the value before the market collapses. The rapid creation of meme coins—many with no clear purpose or business plan—further exacerbates these risks.

The Broader Impact on Cryptocurrency

The rise of meme coins is a threat not only to individual investors but also to the reputation of the entire cryptocurrency market. The SEC’s decision to exempt meme coins from securities regulation could inadvertently fuel the speculative frenzy surrounding these tokens, leading to greater financial losses for uninformed or inexperienced investors. If left unchecked, this could result in further erosion of trust in the crypto space.

Moreover, the proliferation of meme coins risks overshadowing more serious, innovative cryptocurrency projects. As hype-driven coins dominate the market, investors may be distracted from projects with real potential for technological development, financial inclusion, and decentralized solutions. This could hinder the broader growth of the crypto ecosystem, undermining its credibility as a transformative force in the financial sector.

A Turning Point for Crypto Regulation?

The SEC’s ruling on meme coins marks an important moment in the ongoing regulatory debate surrounding cryptocurrency. While it provides clarity on the regulatory status of meme coins, it also highlights the dangers of allowing such speculative assets to proliferate unchecked. As meme coins continue to gain traction, it is crucial that regulators, investors, and the broader crypto community consider the long-term consequences of their unchecked growth. Ultimately, the success of cryptocurrency will depend on its ability to move beyond speculative trends and towards projects that offer real value, utility, and innovation.

The SEC’s decision may have temporarily settled the question of whether meme coins are securities, but it also gives rise to a series of broader questions.  Primarily, will this decision lead to an erosion of securities regulations, a rise in unregistered and unregulated securities offerings and ultimately an erosion of investor trust and confidence?  What role will these assets play in the future of cryptocurrency, and how can the industry preserve its credibility amid the rise of digital gambling?

Private Capital Markets & Alts

Posted on by Oscar Jofre Tags: , , ,

Alternative investments (Alts) have become synonymous with the evolution of private capital markets. What was once a fragmented sector of private equity, venture capital, and real estate is now undergoing a technological transformation powered by blockchain, AI, and digital securities.

The JOBS Act laid the foundation for this shift by opening new capital-raising avenues through Reg CF, Reg A, and Reg D (506(b), 506(c), and 504). Today, Alts and private capital markets are converging, requiring the same level of compliance, transparency, and regulatory oversight as traditional securities.

This transformation would not be possible without the Kore Infrastructure—a fully integrated compliance and capital-raising ecosystem designed for the JOBS Act and beyond. KoreChain, the first blockchain company to receive qualification for tokenized securities, is driving this shift, enabling issuers, broker-dealers, and investors to transact 100% compliantly under FINRA and SEC regulations.

The JOBS Act: The Catalyst for the Alts Revolution

The JOBS Act of 2012 revolutionized private markets by allowing issuers to raise capital from both accredited and non-accredited investors while staying within regulatory compliance. This led to the rise of RegCF, RegA+, and RegD offerings, which have since fueled the Alts sector:

  • Regulation CF: Enables companies to raise up to $5 million per year from the general public, opening investment access beyond institutions.
  • Regulation A+: Allows issuers to raise up to $75 million annually with SEC qualification and investor protections.
  • Regulation D (506(b), 506(c), 504): Permits companies to raise unlimited capital from accredited investors while offering varying levels of solicitation and investor verification requirements.

Why This Matters for Alts

Alts are no longer an unregulated asset class—they operate within the same regulatory framework as traditional securities. Whether it’s venture capital, tokenized assets, private equity, or digital securities, issuers must follow AML/KYC, investor verification, and secondary market compliance just as they would in private placements under Reg D.

🔹 Key Takeaway: If you are working with a FINRA-registered broker-dealer, your Alts transactions must adhere to the same compliance standards as any other private market securities offering.

KoreChain: The First Blockchain Qualified for Tokenized Securities

One of the most significant advancements in Alts and private capital markets is the tokenization of securities. KoreChain is the first blockchain company to receive SEC qualification for tokenizing securities, providing a fully compliant digital infrastructure for the industry.

How KoreChain Transforms Alts & Private Markets

✅ Regulatory-Approved Digital Securities: KoreChain ensures that tokenized assets comply with SEC and FINRA regulations, making them as legitimate as traditional securities.
✅ Smart Contracts for Compliance: Transactions are pre-programmed to meet AML/KYC, investor verification, and transfer restrictions, reducing human error.
✅ Immutable Records & Auditability: All transactions are recorded on the blockchain, meeting FINRA Rule 17a-4 and SEC audit requirements.
✅ Seamless Secondary Market Trading: KoreChain enables compliant secondary trading of private securities, bridging the liquidity gap in private markets.

By leveraging blockchain technology, issuers, broker-dealers, and transfer agents can streamline Alts transactions with greater efficiency, security, and compliance oversight.

How Compliance for JOBS Act & Alts Are the Same

A common misconception is that alternative investments require different compliance rules compared to private securities under the JOBS Act. The reality? They are the same.

If a firm is working with a FINRA broker-dealer, compliance applies regardless of whether an offering involves venture capital, real estate, or digital assets. Here’s why:

1. Investor Verification Is Mandatory

Under Reg D 506(c)  issuers must verify accredited investors before accepting investments.  Kore Infrastructure automates real-time investor verification, ensuring 100% compliance with SEC requirements.

2. FINRA Rule 17a-4 for Recordkeeping

All broker-dealer records must be stored in a tamper-proof, auditable format. KoreChain’s blockchain-based system meets FINRA’s 17a-4 requirements, ensuring that investor records, contracts, and transaction histories are permanently recorded.

3. AML/KYC Compliance for All Transactions

Regardless of whether you’re dealing with tokenized securities or traditional RegD offerings, AML (Anti-Money Laundering) and KYC (Know Your Customer) procedures must be followed. Kore’s Compliance Desk automates identity verification, AML, sanction, PEP, bad actor, and fraud prevention.

4. Secondary Market Trading Compliance

Alts and private securities face liquidity challenges. However, KoreChain enables fully compliant secondary trading, ensuring that all transactions meet SEC Rule 144 and FINRA ATS (Alternative Trading System) regulations.

🔹 Key Takeaway: Broker-dealers facilitating Alts transactions must follow the same compliance framework as they would for private placements under the JOBS Act.

Case Study: How Kore Infrastructure Ensures 100% Compliance for Alts

📌 Challenge: A FINRA broker-dealer was struggling to handle compliance for 506(c) and tokenized securities, requiring manual investor verification and document storage.

📌 Solution: By integrating Kore Infrastructure, they:

  • Automated investor verification (reducing time from weeks to minutes).
  • Ensured full FINRA Rule 17a-4 compliance by using immutable blockchain-based records.
  • Enabled compliant secondary market trading for tokenized assets.

📌 Outcome: The firm maintained 100% regulatory compliance, improved operational efficiency, and reduced compliance costs by 40%.

Final Thoughts: Why Alts & Private Markets Are the Future of Investing

The line between private capital markets and alternative investments is no longer blurred—they are one and the same. With the right technology, regulatory infrastructure, and compliance framework, Alts are becoming the future of diversified investing.

🔹 Key Takeaway: If you are a broker-dealer, compliance officer, or investment professional, ensuring that Alts transactions follow JOBS Act regulations is critical. The Kore Infrastructure provides the technology, compliance automation, and regulatory framework needed to operate with 100% confidence.

🚀 Ready to Navigate Alts & Private Markets with Confidence?

🔗 Schedule a Meeting to See Kore Infrastructure in Action

Broker-Dealers + Tokenization = Online Capital Formation

Posted on by Peter Daneyko Tags: ,

Have you ever wondered how tokenization is transforming the role of broker-dealers in private markets?

When we talk about tokenization in the context of private markets, we’re specifically referring to tokenized securities. These are digital representations of ownership in assets like equity, debt, or other financial instruments, governed by securities regulations. Tokenized securities are issued and managed on blockchain platforms, providing new avenues for broker-dealers to streamline processes and expand market access.

The fusion of tokenized securities and online capital formation is revolutionizing how broker-dealers facilitate capital raises. By digitizing assets and ensuring compliance, tokenization creates new opportunities for efficiency, transparency, and liquidity in private markets.

This article explores how broker-dealers are leveraging tokenization to enhance online capital formation and position themselves as leaders in the digital securities revolution.

Understanding Tokenization: A Game-Changer for Capital Formation

At its core, tokenization refers to the process of converting real-world assets—like equity, debt, or tangible assets—into digital tokens that are issued and managed on a blockchain. These tokens represent ownership, rights, or claims to the underlying asset and can be traded seamlessly on digital platforms.

However, to truly unlock the potential of tokenized securities, it’s essential to understand how they work within the framework of U.S. regulations, particularly Regulation A+ (RegA+). Simply creating a token does not mean it can be transacted under RegA+ or any other regulation, nor does it guarantee qualification from the SEC. Different jurisdictions have distinct rules, and regulations vary widely in their requirements.

Tokens alone do not inherently have specific rights; their value and function depend on what lies behind them. This includes the smart contracts that govern their operation and the regulatory framework they adhere to. Compliance typically requires the involvement of third-party intermediaries, such as transfer agents and custodians, who play a pivotal role in managing transactions and investor protections.

A critical challenge is that many of these intermediaries may not yet be equipped to accommodate blockchain-based solutions. This gap underscores the need for robust infrastructure that bridges traditional systems with blockchain innovation—something that companies like Kore excel at by providing end-to-end solutions designed for regulatory compliance.

The Role of Broker-Dealers in the Tokenization Ecosystem

Broker-dealers are uniquely positioned to facilitate tokenization due to their expertise in compliance, due diligence, and investor protection. Their role in the tokenization process includes:

  • Structuring the Offering: Broker-dealers work with issuers to design tokenized securities that meet regulatory standards and align with market demand.
  • Investor Onboarding: Using advanced platforms, broker-dealers streamline KYC/AML processes to onboard investors efficiently and securely.
  • Managing Compliance: From blue-sky filings to ensuring adherence to SEC rules, broker-dealers oversee every aspect of regulatory compliance.
  • Facilitating Secondary Market Trading: Broker-dealers enable trading of tokenized securities on Alternative Trading Systems (ATS), creating liquidity pathways for investors.

Blockchain plays a pivotal role in this ecosystem by providing immutable audit trails and logs of the investor journey. Every interaction—from initial accreditation checks to the final transaction—is recorded on a secure, permissioned blockchain, offering transparency and traceability. This ensures broker-dealers have a comprehensive record for reporting, compliance, and auditing purposes.

Tokenization and Online Capital Formation: The Perfect Match

Online capital formation has already reshaped private markets by making it easier for issuers to connect with investors. Adding tokenized securities into the mix amplifies these benefits by introducing unparalleled flexibility and scalability.

  • Broader Investor Access: Tokenized offerings allow broker-dealers to attract both retail and institutional investors through online platforms.
  • Reduced Costs: Tokenization minimizes administrative overhead by automating processes like cap table management and dividend distribution.
  • Improved Speed: Blockchain technology accelerates settlement times, enabling faster and more efficient transactions.

For broker-dealers, combining tokenization with online capital formation unlocks significant competitive advantages. With infrastructure providers like Kore, they can offer end-to-end solutions that simplify compliance while delivering innovative, investor-friendly experiences.

Conclusion: Tokenization is the Future of Capital Formation

As private markets continue to evolve, the integration of tokenized securities and online capital formation is becoming a necessity for broker-dealers. By adopting this technology, broker-dealers can expand their service offerings, enhance operational efficiency, and deliver greater value to issuers and investors.

With the support of technology platforms like Kore, broker-dealers are equipped to navigate the complexities of tokenized securities while ensuring SEC compliance and providing auditable records throughout the investor journey. Blockchain’s ability to log every step of the process transparently further strengthens trust and efficiency in private market transactions.

The equation is simple: Broker-Dealers + Tokenized Securities = The Future of Online Capital Formation. However, it’s critical to recognize that your tokenization technology partner must go well beyond just tech. Understanding the regulations governing the jurisdiction—end to end—is essential, or you may find yourself in a world of compliance challenges.

Tokenization involves more than creating a digital asset for primary sales. It requires a robust framework to manage holder tokens post-issuance, including updating personal information, facilitating transfers, and enabling trades. These activities often interact with intermediaries such as broker-dealers or transfer agents and must comply with regulations to ensure smooth operations and avoid downstream disruptions.

By choosing a technology partner with deep expertise in both blockchain and securities regulations, broker-dealers can ensure a seamless, compliant, and future-ready approach to capital formation.

Change is Coming: What Do We Really Need?

Posted on by Marty Tate Tags: , , , , ,

By Marty Tate

In the week following the 2024 Presidential Election, I received a number of calls from clients asking what this to expect.  The internet was a firestorm of speculation and rumors, including the possibility of the new administration dismantling the SEC.  As a securities lawyer with over 25 years of experience and having gone through multiple changes in administrations, I tried to balance history with some of the unprecedented changes being tossed around.

We are now over a month into the new administration and we have seen a definitive course of change from prior administrations, including the first term of the current administration.  The signing of executive orders, the nomination of Paul Atkins, a crypto industry professional, to serve as the new SEC Chairman, Mark Uyeda to serve as the interim commissioner and Hester Pierce to be part of Crypto Task Force signal a drastic change in the industry.  The SEC’s recent shift in leadership and the formation of a dedicated cryptocurrency working group signal an opportunity for meaningful regulatory reform that could balance innovation with investor protection.  I believe that the need for solid regulation and guidance is long overdue, but do not believe that a complete lack of regulation, oversight and even enforcement is in the best interest of issuers, investors or anyone else.  Here are some areas needing SEC guidance and change that have been discussed among industry leaders: 

  1. Provide Guidance on “Airdrops” and Incentive-Based Distributions
    “What about Airdrops?” was a weekly inquiry.  It’s a crucial part of engagement and the SEC’s current regulatory framework does not provide clear guidance on how cryptocurrency projects can distribute tokens through “airdrops” or incentive-based rewards without triggering the registration requirements for securities offerings. Airdrops typically involve the free or low-cost distribution of tokens to participants as a reward for previous engagement with a blockchain network. The current thinking has been that airdrops constitute a securities offering as an investment contract.  Given their role in promoting decentralization and community involvement, the SEC should provide interpretive guidance that clarifies how such distributions may occur without being categorized as securities offerings and without the distributed tokens being deemed securities. Key considerations could include:
  • Whether the distributed tokens derive their value primarily from the functionality of the underlying blockchain or distributed ledger technology.
  • Whether the tokens in question were initially issued as securities, in which case they may still fall under SEC jurisdiction.
  • Establishment of a safe harbor for tokens meeting these criteria, which would provide legal certainty for blockchain projects in the U.S.

This guidance would also address the trend of incentivizing international participants at the expense of U.S. investors, thus aligning the regulatory framework with national interests.

  1. Modify Crowdfunding Exemption
    The round hole for the square peg of token offerings has been the crowdfunding rules.  The SEC’s current crowdfunding rules allow for the sale of securities using general solicitation, but the rules impose limitations on the amount that can be raised, which may be insufficient for cryptocurrency startups that rely on broad token distribution to achieve network effects.  Increasing the limitations and providing guidance on the use of crowdfunding rules for digital assets could help foster growth, confidence and innovation as issuers have clear guardrails to follow.
  2. Broker-Dealer Participation in Crypto Assets
    Currently, traditional broker-dealers face significant regulatory hurdles when attempting to trade crypto assets, primarily because they must obtain separate approvals to engage in crypto transactions and meet additional regulatory requirements. This creates a barrier to market participation, hindering liquidity and broad market access. The SEC and FINRA should create a streamlined registration process for broker-dealers wishing to trade and custody crypto assets, both securities and non-securities. This would include the development of a regulatory framework for crypto asset transactions, particularly in relation to anti-money laundering (AML) and know-your-customer (KYC) rules.  Regulators should collaborate with self-regulatory organizations (e.g., FINRA) to issue joint guidance that addresses the unique risks of crypto asset trading.
  3. Custody and Settlement Guidance for Crypto Assets
    Ambiguity regarding the regulatory treatment of crypto asset custody and settlement rules presents a significant obstacle to institutional adoption. Financial institutions are hesitant to engage with crypto assets due to unclear guidance on custody practices and accounting treatment. The SEC should provide explicit guidance regarding the custody and settlement of crypto assets. Guidance could include clarification on how investment advisers can hold crypto assets under the Investment Advisers Act, with an emphasis on safeguards such as multi-signature wallets and off-chain storage; establish industry-wide standards for the settlement of crypto transactions, including timelines, dispute resolution processes, and transaction verification mechanisms; and repeal or amend SEC Staff Accounting Bulletin 121, which currently imposes liability accounting for custodial crypto assets, creating unnecessary risks for custodians and potentially harming investor protection.
  4. Implementation of Section 15c2-11 Certification for Crypto Asset Listings
    In decentralized networks, issuers of crypto assets often lack a central entity responsible for providing continuous disclosures, raising concerns about the availability of accurate and current information for investor. The SEC should extend Section 15c2-11 of the Securities Exchange Act to apply to crypto asset trading platforms. This would allow these platforms to trade any crypto asset, provided they can demonstrate up-to-date information about the asset’s design, functionality, and risks.   Changes would include a streamlined certification process for crypto assets on alternative trading systems (ATS), ensuring transparency and accuracy of information; require exchanges to conduct robust due diligence on crypto assets, including verifying the identity of the issuer and its operational details.

Meme Coins?

On February 27, 2025, the U.S. Securities and Exchange Commission (SEC) made a significant announcement that has reverberated across the cryptocurrency ecosystem: meme coins, or cryptocurrencies inspired by internet memes and viral trends, are not considered securities. This ruling has sparked questions within the world of securities regulation and sparked new debates about the role of meme coins in the broader crypto market and the future of cryptocurrency as a whole.  This was not something that most people felt was a priority and was not on my list but perhaps due to internal pressure, this was one of the first actions taken by the SEC.  I do not think this does anything but open up the floodgates for issuers to engage in what basically constitutes unregulated gambling.  The opportunity for fraud and consumer harm is high.  I believe this will likely lead to uncertainty about what constitutes a security and will likely create further distrust of the crypto industry.

Where next?

The U.S. SEC faces a critical opportunity to reshape its approach to crypto asset regulation in a way that supports innovation while maintaining investor protection. The proposed regulatory adjustments, from clarifying the treatment of airdrops to reforming the rules for crowdfunding, custody, and ETPs, would provide much-needed clarity to market participants and foster growth in the sector. While these changes would not constitute a comprehensive regulatory framework, they represent essential steps toward modernizing the SEC’s oversight and ensuring that the U.S. remains competitive in the global cryptocurrency market.

Through these actions, the SEC can strike a balance between protecting investors, ensuring market integrity, and encouraging capital formation and innovation in the rapidly evolving crypto space.

The Wheels of Regulation Go ‘Round and ‘Round

Posted on by Oscar Jofre

by Dr. David E. McClean

CEO, The DMA Consulting Group

MAIN is interested in regulation. Good regulation. Regulation that serves the public interest as well as the interests of the industry, without undue burdens.

As you may have gathered from news reports, there is a lot going on in the area of regulation – or perhaps better put, “deregulation.” There seems to be a growing consensus that the regulatory regime in the United States has gotten too difficult to navigate, especially for small firms (investment managers and broker-dealers). This regime, which is partly the result of Congress delegating too much non-specific authority to various regulatory agencies, has created moving goalposts and attendant uncertainties about the rules of the road with which businesses must comply. This has led to a regulatory labyrinth, with worries about infractions leading to increased costs across industries, fines, and damaged careers.

The problems are not faced by the financial services industry alone. Many tech companies have expressed concerns about the cost and complexity of compliance with data protection laws, such as the General Data Protection Regulation (“GDPR”) in the EU and the California Consumer Privacy Act (“CCPA”). (It is difficult to know whether EU or US regulation has become the most baroque; the competition is fierce.) As is often the case with new rules, smaller firms with limited resources have argued that these privacy regulations disproportionately affect them, compared to larger businesses with more resources, although even larger firms have balked at the complexities, uncertainties, and costs.

Car companies have had to deal with stricter fuel efficiency standards and emissions regulations and have pushed back, arguing that these standards and regulations have increased production costs and could lead to higher prices for consumers and to lost market share.

The oil and gas industries have lobbied against limits on drilling, hydraulic fracturing (“fracking”), and methane emissions, claiming they threaten jobs and energy independence.

Manufacturers of single-use plastics have opposed bans or taxes on plastic bags and other products, claiming they hurt business profitability and overlooked the economic cost to consumers.

Hospitals and pharmaceutical companies have opposed regulations requiring them to disclose prices, arguing this could lead to price fixing and consumer confusion.

Tobacco and vaping companies  have resisted regulations limiting the sale of flavored products, claiming they hinder innovation and legitimate adult use (the “nanny state” argument) while fueling a black market.

Of course, to be clear, pushback and complaint don’t necessarily mean an industry is correct in its assessment of the need for proposed regulation. In fact, we can sympathize with some regulatory actions concerning environmental protection and the need to transition to cleaner energy sources. Indeed, some regulatory efforts may not be muscular enough. I will have more to say about this shortly.

In the financial services industry, which is the focus of MAIN’s programs and initiatives, the baroque nature of securities and investment management regulation has been resisted strenuously, including in the courts, especially in recent years. MAIN joins other voices, from the LSTA to SIFMA and small-firm groups and councils embedded in or otherwise working with FINRA, the NFA, and other regulators, in resisting some of the rules that have been proposed over the past several years.

The grounds for such resistance? They are several – 1. The rules seem arbitrary and capricious; 2. The rules are unnecessary; 3. The rules do little to protect the public while creating serious burdens on firms; and, last but certainly not least, 4. The regulators have exceeded their authority.    

It is important that we always bear in mind that regulation is necessary for economic growth, for investor and consumer protection, and for the attractiveness of US markets. It is not an accident that the US has a ~ $29 trillion GDP and  that US businesses are considered among the safest in the world in which to invest. But regulatory creep and overregulation are by no means virtues of the capitalist system. Regulatory creep and overregulation (including regulation by enforcement) seem to have become the norm, especially, many would argue, under outgoing SEC Chairman Gary Gensler.  

But the financial services industry has been less than timid in taking on this regulatory overreach. For example, the very existence of FINRA has been challenged in the courts, on Constitutional grounds (Alpine Securities v. FINRA). While legal theorists, working in the esoterica of regulatory theory, may have seen the possibility for such a claim, most ordinary market participants were stunned that a cogent constitutional argument could be made that would upend a central pillar of securities regulation. The challenges to FINRA are ongoing.

While not affecting only the financial services industry, implementation of The Corporate Transparency Act (“CTA”) has been halted by a federal court injunction. The CTA, as written, requires hundreds of thousands of businesses to file with the federal government information about their beneficial owners. Many regulated businesses, such as broker-dealers, would have been largely exempt – largely, not totally, because these regulated businesses often utilize non-regulated entities for a variety of business purposes, and many of those entities may have been required to comply). The injunction has been appealed by the government, and it remains to be seen whether the CTA will be enforced (although there has been a back-and-forth, because of court actions, concerning when enforcement can proceed).

The “new dealer rule,” which would have deemed certain investment funds (and similarly situated entities) to be broker-dealers, has been, substantially, vacated by another federal court in litigation brought against the SEC by the Managed Funds Association. A few funds were already caught in the snare of the new dealer rule and have had to pay substantial fines and have had their reputations tarnished by SEC orders.  

The new “private fund adviser rule” has, as well, been vacated in its entirety in another court action, on the grounds of SEC overreach. Among other things, this rule would have reached through registered investment advisers to impose certain regulatory burdens on funds that they manage and that are otherwise unregulated by the SEC.

The SEC’s skepticism of crypto has been challenged vigorously, with large players such as Blackrock and VanEck jumping in with both feet.

Recently, Jamie Dimon, apparently fed up with the constant tweaking of commercial banking rules, made it clear that he has had enough. The compliance costs on commercial banks have gone through the roof, and Dimon thought it time to “punch back.”

In September of 2024, the SEC approved FINRA’s and the MSRB’s request to change the 15-minute reporting time for TRACE and RTRS from 15 minutes to just 1 minute. The new rule, though approved by the SEC, is being criticized, and those criticisms may lead to a spate of court challenges. Many argue that while transparency in the bond market is a worthy goal, the manner in which the market works doesn’t really permit such a short reporting window, and that it will only lead to numerous reporting infractions and disciplinary actions against otherwise compliant firms.

In June 2024, the Supreme Court declared that SEC’s use of administrative law judges in cases involving allegations of fraud may be violative of the rights of the accused. The decision was the result of  SEC v. Jarkesy, challenging the SEC’s practice of using administrative law judges, or specialized judges within federal agencies who decide legal disputes outside of the typical judicial system. The court concluded that defendants facing penalties for securities fraud are entitled to jury trials.

Also in June 2024, came the demise of the “Chevron deference” or the “Chevron rule.” The Chevron deference gave broad powers to regulatory agencies to determine the meaning of statutes that pertain to the areas under their regulatory purview. In 1974 the Supreme Court stated that an agency’s administrative interpretation, so long as it was consistent with the agency’s other statements and with the congressional purpose, would be able to interpret relevant statues, rather than judges. On June 28, such agency authority was pulled-back substantially, with judges handed the interpretive powers once placed in the hands of federal agencies. The Supreme Court issued its decision striking down the Chevron deference, in the case Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). Chief Justice Roberts wrote the majority opinion, which held that the Chevron deference conflicted with the Administrative Procedure Act (“APA”) since “under the APA, it thus remains the responsibility of the court to decide whether the law means what the agency says.” He continued that “Congress expects courts to handle technical statutory questions,” not agencies.

I mentioned that, in certain cases, regulatory actions (through rulemaking or otherwise) are indeed called for. Some industry complaints can be no more than gratuitous, kneejerk, or – frankly – obtuse.  Some robust rulemaking has been brought upon the industry by its own bad acting and negligence (Sarbanes-Oxley (2002); Dodd-Frank (2010), etc., whether or not one agrees with all of their provisions), and in those cases complaining about the compliance costs rings hollow. Beyond this, we have to remember that the slogan “deconstructing the administrative state,” while serving as a good populist rallying cry, can lead to unintelligent and ham-handed ways to address regulatory overreach. The goal isn’t the death of our regulatory agencies. The goal is better and more intelligent regulation. The recent wave of push-back, which targets specific problematic rules one by one, is the way to do it.  However, it remains to be seen whether some of the more sweeping efforts to “deconstruct” the administrative state will prove apt – or disastrous.

Securities Simplified: Mastering Compliance in Modern Markets

Posted on by Oscar Jofre Tags: ,

The private capital markets are evolving, driven by regulatory changes, technological advancements, and the increasing role of compliance in ensuring investor protection. Regulation CF, Regulation A, and Regulation D (506(b), 506(c), and 504) have opened new opportunities for issuers and investors, but they also present compliance challenges for FINRA broker-dealers, compliance officers, and regulated FINRA intermediaries.

In this blog, we simplify securities compliance, highlight key regulatory updates, and explore how technology—particularly the Compliance Desk within the Kore Infrastructure—ensures full adherence to FINRA Rule 17a-4.

Regulatory Landscape: Understanding CF, A, and D

Regulation CF (Crowdfunding): Expanding Access with Compliance Requirements

Regulation CF (Reg CF) enables startups and small businesses to raise up to $5 million annually from both accredited and non-accredited investors. However, broker-dealers and intermediaries facilitating Reg CF offerings must comply with strict FINRA and SEC requirements, including:

  • Investor Limits: Reg CF has investment limits based on an investor’s income and net worth.
  • Disclosure Requirements: Issuers must file Form C with the SEC, providing financials and risk disclosures.
  • Bad Actor Checks: All issuers and key stakeholders must pass Reg D “bad actor” disqualification screenings.
  • Transaction Compliance: Broker-dealers must ensure that transactions are conducted in compliance with AML (Anti-Money Laundering) and KYC (Know Your Customer) requirements.

Compliance Tip: Using a centralized compliance infrastructure, such as the Compliance Desk within Kore Infrastructure, streamlines these requirements, ensuring seamless investor verification and regulatory filings.

Regulation A (Reg A+): A Mini-IPO with SEC Oversight

Regulation A allows companies to raise up to $75 million per year through public offerings without undergoing a full SEC registration process. While this provides greater fundraising flexibility, it also brings higher compliance obligations, including:

  • Tier 1 vs. Tier 2 Offerings: Tier 2 requires ongoing reporting (Form 1-K, 1-SA, 1-U) and financial audits.
  • Blue Sky Law Considerations: Tier 1 offerings must comply with state-level regulations.
  • Secondary Market Trading: Broker-dealers managing secondary transactions must meet FINRA Rule 2111 (Suitability Rule) and AML/KYC guidelines.

Compliance Tip: Compliance Desk automates reporting, trade tracking, and document retention, ensuring that broker-dealers and issuers meet both SEC and FINRA obligations.

Regulation D: The Private Capital Markets’ Workhorse

Regulation D offers exemptions from full SEC registration, allowing issuers to raise unlimited capital under the following structures:

  • Rule 506(b): Allows issuers to raise from accredited investors and up to 35 sophisticated investors, with no general solicitation.
  • Rule 506(c): Allows public solicitation, but all investors must be verified as accredited.
  • Rule 504: Allows raises of up to $10 million annually, with potential state-level restrictions.

For broker-dealers handling Reg D transactions, key compliance considerations include:

  • Accredited Investor Verification: Ensuring compliance with SEC Rule 501 for investor accreditation.
  • Advertising and General Solicitation: 506(c) offerings must document investor verification before accepting capital.
  • Transaction Reporting: SEC filings (Form D) and AML/KYC screenings are mandatory.

Compliance Tip: Compliance Desk’s AI-powered investor verification and automated compliance tracking help broker-dealers manage complex Reg D transactions with ease.

Technology & Compliance: The Role of Kore’s Compliance Desk

Ensuring 100% compliance in modern markets requires digital infrastructure that seamlessly integrates with FINRA and SEC requirements. The Compliance Desk within Kore Infrastructure provides:

✅ Fully Automated FINRA Rule 17a-4 Compliance

  • Ensures that all records, investor data, and communications are stored immutably and securely as per SEC & FINRA mandates.
  • Reduces compliance risk by centralizing all transactional records in an auditable, tamper-proof environment.

✅ Integrated Investor Verification (KYC, AML, Accredited Status)

  • Automates accredited investor verification for 506(c) and Reg A+ offerings.
  • Enhances compliance by performing real-time AML/KYC checks, reducing broker-dealer liability.

✅ Regulatory Reporting & Audit Readiness

  • Streamlines Reg CF, Reg A, and Reg D filings with automated document retention.
  • Simplifies FINRA, SEC, and state-level reporting, ensuring firms are always prepared for audits.

✅ AI-Powered Trade & Secondary Market Compliance

  • Facilitates seamless secondary market trading while ensuring transactions remain fully compliant with SEC and FINRA rules.
  • Automates investor matching, record-keeping, and transaction clearance.

By leveraging Compliance Desk, broker-dealers and compliance officers can fully digitize their compliance workflows, reducing costs and regulatory risk while improving operational efficiency.

Real-World Case Study: How Compliance Desk Ensured 100% Regulatory Adherence

📌 Challenge: A broker-dealer facilitating a 506(c) offering struggled with accredited investor verification, manual reporting, and document retention compliance.

📌 Solution: By integrating Compliance Desk, they:

  • Automated accredited investor verification, reducing processing time from weeks to minutes.
  • Stored all transaction records per FINRA Rule 17a-4, eliminating manual errors and compliance gaps.
  • Ensured SEC & FINRA audit-readiness, simplifying investor tracking and transaction reporting.

📌 Outcome: The firm maintained 100% compliance, reduced administrative costs by 40%, and enhanced investor trust.

Final Thoughts: Compliance is No Longer an Option—It’s a Competitive Advantage

Regulation CF, A, and D provide powerful capital-raising opportunities, but compliance complexities can create barriers for broker-dealers and FINRA-regulated intermediaries. The Compliance Desk within Kore Infrastructure simplifies compliance, ensures 100% adherence to FINRA Rule 17a-4, and allows firms to focus on growth rather than regulatory risk.

Schedule a Meeting to See Compliance Desk in Action

🔗 Click here to set up a demo and discover how Kore’s Compliance Desk can help your firm navigate the evolving regulatory landscape with confidence.

 

The Evolution of Online Capital Formation: Insights from Oscar A. Jofre

Posted on by Oscar Jofre

The journey of Online Capital Formation (OCF) since the signing of the JOBS Act in 2012 represents a seismic shift in democratizing access to capital markets. Initially known as “crowdfunding,” this framework has evolved into a sophisticated ecosystem that accommodates a diverse array of investor types—retail, accredited, institutional, venture capital, governments, strategic investors, and private equity. This evolution reflects the industry’s maturity and its growing importance as a pillar of private capital markets.

From Crowdfunding to Inclusive Financing

The origins of OCF lie in platforms designed to enable retail investors to participate in capital formation. Over the years, this model has expanded significantly, welcoming participation from institutional investors and venture capitalists. This expansion was facilitated by critical regulations under the JOBS Act, including Regulation CF (RegCF), Regulation A+ (RegA+), and Regulation D (RegD). These frameworks have provided structured pathways for companies to raise capital from a broader investor base while ensuring compliance, transparency, and investor protection.

Key Regulatory Milestones

  • Increased Funding Limits: Recent updates to the JOBS Act raised funding limits for Regulation A+ to $75 million and Regulation CF to $5 million. These changes have widened the playing field for businesses seeking capital, reflecting the ecosystem’s growth and adaptability.
  • Enhanced Transparency and Compliance: Regulations have evolved to balance accessibility with robust compliance requirements, fostering trust among issuers and investors alike.

Kore’s Integral Role in the Ecosystem

As the OCF landscape has matured, platforms like Kore have emerged as critical infrastructure providers. Kore integrates the myriad participants in this ecosystem—broker-dealers, funding platforms, legal professionals, transfer agents, payment processing, compliance, regulatory logic, functional logic, and secondary market operators—into a unified framework that prioritizes efficiency, compliance, and scalability.

Kore’s Unique Value Proposition

  1. Technology for Intermediaries:
    • Kore’s solutions are designed to “save effort, generate revenue, and ensure compliance.”
    • They empower Chief Compliance Officers (CCOs) to transition from being perceived as cost centers to invaluable assets, making their organizations more compliant and profitable.
    • Features include audit-proof systems that simplify the complexities of regulatory adherence, ensuring peace of mind for CCOs and managing partners alike.
  2. 100% Private Label:
    • Kore offers end-to-end solutions tailored for intermediaries, broker-dealers, and transfer agents. These customizable platforms enable seamless operations without compromising brand identity.
  3. Compliance-Driven Technology:
    • Kore’s systems are built to align with SEC regulations, reducing risks for issuers and safeguarding investor interests.
    • This compliance-first approach fosters trust and mitigates potential liabilities.
  4. End-to-End Management:
    • From pre-raise planning to post-raise investor relations, Kore’s all-in-one platform ensures a streamlined, transparent, and efficient process.
  5. Secondary Market Enablement:
    • Through partnerships with FINRA-registered Alternative Trading Systems (ATS), Kore facilitates liquidity, empowering investors to trade securities with confidence.

The Expanding Opportunity Landscape

The matured OCF ecosystem offers unprecedented opportunities for both issuers and investors, breaking traditional barriers and promoting financial inclusion.

Empowering Stakeholders

  • Investors: OCF provides access to diverse investment opportunities, enabling participation in sectors previously reserved for elite institutional players.
  • Issuers: Companies can leverage OCF to raise capital cost-effectively while maintaining control and equity.

Strategic Advantages for Key Participants

  1. Broker-Dealers:
    • Gain access to standardized, compliance-ready platforms that simplify regulatory responsibilities and expand their service offerings.
  2. Funding Platforms:
    • Leverage Kore’s infrastructure to broaden reach, engage a more diverse audience, and enhance operational efficiency.
  3. Issuers:
    • Utilize Kore to maintain transparency with investors, ensure accurate record-keeping, and access secondary market liquidity seamlessly.
  4. Legal and Financial Professionals:
    • Kore’s tools and integrations streamline compliance and due diligence, enabling professionals to deliver exceptional value to clients.

Future Growth Trajectory

The future of OCF is poised for transformative growth, driven by emerging trends in digital securities, tokenization, and enhanced secondary trading capabilities. These advancements promise to further accelerate adoption, positioning private capital markets as a viable, thriving alternative to traditional public markets.

The Path Forward

  • Digital Securities and Tokenization:
    • Tokenized assets are revolutionizing how securities are issued and traded, offering greater transparency and accessibility.
  • Enhanced Liquidity:
    • The integration of secondary market mechanisms ensures that investors can exit their positions with confidence, fostering a more dynamic investment environment.
  • Global Accessibility:
    • As regulatory frameworks continue to align globally, OCF platforms like Kore are well-positioned to facilitate cross-border investment opportunities.

The evolution of Online Capital Formation is not merely a shift in how capital is raised—it’s a revolution that democratizes access to investment opportunities while fostering transparency and compliance. As this ecosystem matures, platforms like Kore will play an indispensable role in enabling issuers, investors, and intermediaries to thrive in an increasingly complex and competitive market.

By embracing the innovations and opportunities presented by OCF, stakeholders can position themselves at the forefront of this dynamic and transformative industry. The time to act is now—leverage the tools, strategies, and insights available to unlock the full potential of Online Capital Formation.

When is a Transfer Agent Mandatory for Private Companies Raising Capital?

Posted on by Jason Futko

When is a Transfer Agent Mandatory for Private Companies Raising Capital?

A transfer agent isn’t always mandatory for private companies raising capital, but there are certain circumstances where it becomes necessary or highly beneficial. Here are key scenarios in which a transfer agent is either mandatory or advantageous:

Regulation A+ and Regulation CF Offerings

If a private company is raising capital under Regulation A+ (Reg A+) or Regulation Crowdfunding (Reg CF), the SEC requires the use of a registered transfer agent. This is to ensure accurate record-keeping and investor protections for a large number of retail investors involved in these offerings.

Public Readiness and Future IPO

When a private company is considering a future public offering (IPO) or plans to eventually become publicly traded, a transfer agent is often used early. Transfer agents handle the complexities of shareholder management and prepare the company for the regulatory requirements of a public listing.

High Volume of Investors

As a private company grows and raises capital from numerous investors, managing shareholder records manually can become cumbersome. A transfer agent helps with issuing, recording, and tracking shares, dividends, and transfers, ensuring compliance with SEC rules and easing administrative burden.

Liquidity Events and Secondary Markets

If a company anticipates future liquidity events, such as secondary market transactions, a transfer agent is valuable for tracking ownership changes and ensuring smooth transactions. This is also relevant if a company wants to trade on secondary platforms for private securities (like the Nasdaq Private Market or Forge).

Compliance and Reporting Requirements

Companies in industries with stringent regulatory requirements, such as fintech or healthcare, may also choose to use a transfer agent for their expertise in maintaining accurate shareholder records and ensuring compliance with various regulations.

 

Transfer agent: a key partner in business

In summary, while not always mandatory, using a transfer agent is essential for companies conducting regulated offerings, preparing for public trading, or managing a large number of shareholders.

It can streamline operations, support compliance, and build investor confidence by providing professional management of shareholder records.

 

Discover Kore’s Transfer Agent Services

Investment Opportunities: What You Need to Know Before Starting in Equity Crowdfunding

Posted on by Jason Futko Tags: ,

Did you know that equity crowdfunding has opened the door to investing in early-stage startups for millions of people, not just accredited investors? 

This form of investment offers the chance to engage directly with companies you believe in and potentially benefit from their growth. However, it’s crucial to recognize that these opportunities come with their own set of risks and rewards, which requires thoughtful consideration.

As the interest in equity crowdfunding continues to grow, understanding the basic principles is key for anyone looking to enter this field. This article aims to provide you with essential knowledge about equity crowdfunding, from evaluating your risk tolerance to conducting thorough research on potential investments.

Please remember that this content is intended to inform and guide you but should not be mistaken for personalized financial advice. Investment opportunities carry some degree of uncertainty, so careful planning is necessary to make decisions that align with your financial goals.

 

Understanding Your Investor Profile

Before diving into equity crowdfunding, it’s essential to understand your investor profile. Knowing your risk tolerance, financial goals and available funds will help guide your decisions and keep your investments aligned with your personal objectives.

1. Risk Tolerance

Every investment comes with a certain level of risk, and it’s crucial to determine how much risk you’re willing to take on. Let’s break down the common levels of risk tolerance:

Risk Level Characteristics
Conservative Prefers low-risk investments that prioritize protecting the initial amount invested.
Moderate Open to taking on some risk in exchange for the possibility of higher returns but remains cautious.
Aggressive Seeks the highest returns and is comfortable with substantial risk, even if it means potential losses.

To better understand your comfort level with investment risk, you can start by thinking in simple (but smart) questions like these:

  • How much of your investment could you lose before you’d start to feel uneasy? Everyone has a different answer here – some are comfortable with taking a small risk, while others prefer to play it safe.
  • What’s your main goal? Are you hoping for big gains, even if it means more risk, or is protecting your initial investment your top priority?
  • How long can you wait for your investments to bounce back if things go wrong? Do you have years to recover, or do you need access to that money sooner?

2. Investment Objectives 

Grow your money (capital appreciation): You might want to see your initial investment increase in value over time. This usually happens when the company’s shares become worth more.

Generate steady income: You might be interested in investments that provide regular payouts, like dividends derived from a company’s earnings.

Support companies you believe in: You may choose to invest in businesses that align with your values, making a positive impact socially, environmentally, or ethically. What to learn more? Check this article about impact investing.  

3. Investment capacity

Now that you have a broader knowledge about risk tolerance and investment objectives, it’s worth remembering: Before participating in equity crowdfunding (or any other kind of investment), it’s crucial to only invest funds that you can afford to lose without prejudicing your financial stability. Alternative investments, especially early-stage investments, tend to have a higher risk, so a clear understanding of your financial position is essential.

 

Evaluate your monthly income and expenses to identify your discretionary funds—money available after all necessary expenses are covered. Specialists indicate that before investing, it is good to make sure you have a safety net in place, ideally an emergency fund.

 

Keep in mind that some  types of investments often require a long-term commitment, and it might take years before you see any return on your money. 

 

Investment Opportunities: Understanding Regulations and Investor Protections

When it comes to investment opportunities, understanding equity crowdfunding regulations is crucial for making well-informed decisions. These rules are in place to safeguard investors and ensure that companies raising capital meet legal requirements. 

Check out some useful information below that will enlighten your path of discovering investment opportunities in equity crowdfunding.

Equity crowdfunding in the U.S. is mainly regulated by the JOBS Act (Jumpstart Our Business Startups Act), which aims to simplify the process for small businesses to secure funding while maintaining protections for investors. Key elements include:

  • SEC Registration: Companies must register their offerings with the Securities and Exchange Commission (SEC) to guarantee transparency and compliance.
  • Investment Limits for Non-Accredited Investors: There are caps on how much non-accredited investors can put into these offerings, designed to protect individuals with less experience or financial resources.
  • Disclosure Requirements: Companies must disclose important details about their financial status, business strategy, and investment terms to help investors make better-informed decisions.
  • Reporting Obligations: Companies must provide ongoing reports to shareholders, ensuring transparency about financial performance and strategic progress. Different JOBS Act regulations require various types of reports—such as annual or semi-annual filings. These reports help shareholders stay informed, evaluate their investments, and maintain trust in the company’s growth.

These measures are intended to balance the need for efficient capital raising with the importance of shielding investors from potential risks. It’s important to know about your rights so you can go after them.

Do you know the difference between accredited and non-accredited investors? Click on the link and get all the answers.

Due Diligence (DD) Basic Checklist

It may seem a complex word but it’s easy to understand. Conducting thorough research before investing in any equity crowdfunding opportunity is vital. Evaluating the company’s potential for success can significantly mitigate risks. Here’s a basic checklist to help in your due diligence:

  • Business Model: Is there a clear strategy for growth and scalability?
  • Management Team: Does the leadership have the necessary skills and experience to navigate industry challenges?
  • Financial Statements: Are the company’s financial projections and statements realistic and transparent?
  • Terms of the Offering: Do you fully understand investor rights, potential returns, and exit strategies?

 

 In addition to understanding the offering, it is valuable to know the different types of securities that companies use in these offerings. Curious? Click here to learn more. 

Investment opportunities: Seeking professional help with a Registered Broker-Dealer (BD)

Broker-dealers play a key role in equity crowdfunding by linking investors with startups that need funding. During the research process, it’s important to find a trustworthy broker-dealer that focuses on transparency and keeping investors safe.

 

FINRA Verification

 

To make sure you’re dealing with a genuine broker-dealer, you can check their license using FINRA’s BrokerCheck. Here’s how to do it:

 

  1. Go to the FINRA BrokerCheck website.
  2. Type the broker-dealer’s name into the search box.
  3. Look over their registration details and any issues they might have faced.

This quick check can help you avoid scams and keep your investments secure.

 

With more than 3,000 registered FINRA Broker-Dealers in the U.S., they are not only numerous but also serve as crucial parties within the financial system. BDs play a significant role in ensuring that the capital markets function efficiently, effectively, and in compliance with securities regulations. Their role helps maintain investor trust, knowing that a regulatory oversight exists to promote fair and transparent transactions.

 

At Kore, we work only with FINRA registered Broker-Dealers. They use our infrastructure, ensuring that all transactions are conducted in a fully compliant manner for everyone involved. 

 

Understanding Common Exit Strategies and Liquidity in Equity Crowdfunding

Exit strategies and liquidity are crucial considerations for investors in equity crowdfunding. Since securities in startups are often illiquid, investors need to be aware of how they can eventually realize returns on their investment. According to the Office of the Advocate for Small Business Capital Formation, the most common exit strategies for startups include public offerings, sales or acquisitions, mergers, and liquidation of assets .

Here’s what is mentioned in an  about Common Exit Pathways for Startups* “

  1. Public Offering: When a startup grows large and sophisticated enough, it might pursue a public offering. This step typically involves listing shares on a stock exchange through an Initial Public Offering (IPO), a merger with a Special Purpose Acquisition Company (SPAC), or a direct listing. A public offering can generate substantial liquidity for early investors, although some shares might be subject to a lockup period before they can be sold.
  2. Sale or Acquisition: Startups might opt to sell to another company or investor, exchanging existing shareholders’ equity for cash, stock, or a mix of both. In many cases, key team members remain with the company for a while after the acquisition as part of the transition process.
  3. Merger: Similar to an acquisition, a merger involves the startup integrating with another company. This approach allows the acquiring company to incorporate the startup’s products or services more seamlessly than developing them in-house.
  4. Liquidation of Assets: If a startup winds down its operations, it will sell off its assets to pay off its debts, with any remaining funds distributed to investors according to their liquidation preference. “

These pathways offer various options for investors to exit their positions in startup investments, but each comes with its own set of challenges and considerations. It’s essential for investors to understand these strategies before diving into equity crowdfunding to make informed decisions about their investments.”

* The information above represents the views of the staff of the SEC’s Office of the Advocate for Small Business Capital Formation and does not carry the force of law. It is not intended as legal advice but as a general overview of exit strategies and liquidity considerations in equity crowdfunding .

Key Takeaways: Investment opportunities in equity crowdfunding

Equity crowdfunding presents a compelling opportunity for investors to participate in the growth of innovative startups. However, like any investment, it comes with risks that require careful consideration. By understanding your investor profile, performing thorough due diligence, and staying informed, you can make more confident investment decisions in this exciting area.

Remember, while equity crowdfunding can be a rewarding endeavor, it’s important to approach it with a strategic mindset. Always seek personalized financial advice before making any decisions to ensure that your investments align with your financial goals and risk tolerance. Click here for more tips for investors.

REIT + JOBS Act = Transparency for 168M American Investors

Posted on by Oscar Jofre

Real Estate Investment Trusts (REITs) are transforming how Americans approach real estate investment, making this sector more accessible and impactful for everyday investors.

These financial structures enable individuals to access commercial real estate opportunities more broadly, contributing to diversified investment options.

There are 168 million Americans, representing about 50% of U.S. households, are invested in Real Estate Investment Trusts. 

The significant growth in REIT investments over the past two decades can be attributed to the increasing popularity of target-date funds and the integration of REITs into general equity funds. These developments have made it more accessible for a broader segment of the population to invest in commercial real estate through REITs.

What is even more staggering is that there are 1,900+ private REITs vs 250 Public REITs, and when it comes to transparency night and day.

Public REITs are very transparent since they are mandated

Today the private company REIT’s no transparency

The game changer is RegA+, and those who use this regulation to deploy their REITs will benefit the more than 168 million Americans who love to invest in REITS. They need transparency like Public REITs, but now they get that and more in Private REITs that in the past were not even offered to everyday Americans to participate in.

As the landscape of REITs continues to evolve, opportunities for private REIT investments are becoming increasingly viable for everyday Americans. Thanks to the introduction of Reg A+, investors can now explore these avenues with greater confidence and clarity. This shift underscores the growing appeal of private REITs as a key player in modern investment strategies.

Broker-Dealers and RIAs: Expand Client IRAs with RegCF, RegA, and RegD

Posted on by Oscar Jofre

In recent years, there has been a growing interest in alternative investments, particularly in private companies. For clients looking to diversify beyond traditional stocks and bonds, private offerings provide an attractive opportunity. These investments, often linked to private markets, have become more accessible thanks to regulations like RegCF (Regulation Crowdfunding), RegA+, and RegD, which allow broader participation from everyday investors.

For FINRA broker-dealers (BDs) and registered investment advisors (RIAs), this shift presents a unique opportunity to add value by educating clients on how to use their Individual Retirement Accounts (IRAs) to participate in these offerings. 

Instead of leaving their retirement savings in the same old stock-and-bond portfolio, clients can diversify by using their IRAs to invest in startups, real estate projects, or even local businesses—all while benefiting from tax advantages. And the broker-dealers or RIAs, can guide them every step of the way.

Regulatory Overview

When it comes to private company investments, three key regulations stand out: Regulation Crowdfunding (RegCF), Regulation A (RegA), and Regulation D (RegD). Each of these regulatory frameworks opens the door to investing in private companies that were once only accessible to accredited or institutional investors, expanding the investment landscape for a broader range of clients.

  • RegCF allows small companies to raise capital from a large number of investors through online crowdfunding platforms. It’s designed for smaller offerings, typically up to $5 million, and allows both accredited and non-accredited investors to participate.

 

  • RegA+ permits companies to raise up to $75 million through a streamlined process, which is divided into two tiers. This regulation is often seen as a bridge between traditional public offerings and private fundraising, allowing non-accredited investors to take part in larger offerings.
  • RegD is primarily aimed at accredited investors, but it includes provisions (like Rule 506(b) and Rule 506(c)) that offer companies flexibility in raising unlimited amounts of capital. While mostly reserved for higher-net-worth individuals, this regulation is widely used in private placements.

Each of these regulations helps expand access to private markets, creating a rich source of investment opportunities for a wide array of investors. By leveraging these offerings, BDs and RIAs can help clients with self-directed IRAs invest in private companies, giving them exposure to alternative assets previously unavailable in traditional retirement accounts.

 

Benefits of Using IRAs for Private Company Investments

One of the key advantages of using an IRA to invest in private companies is the potential for tax benefits. Depending on the type of IRA, clients can experience either tax-deferred growth (in traditional IRAs) or tax-free growth (in Roth IRAs). These tax treatments allow the investment returns to compound without the immediate burden of taxes, making private offerings an appealing option for long-term growth in retirement accounts.

Including private companies in a retirement portfolio also offers significant diversification. Private company investments often have a low correlation with traditional assets like stocks and bonds, meaning they can potentially reduce risk in a broader portfolio. For clients seeking to spread their investment risk and explore opportunities beyond public markets, this can be a key strategy.

Choosing the Right Custodian: A Critical Step

Investing in private companies through an IRA, and selecting the right custodian is essential. Not all custodians can handle these types of investments, so it’s important to choose one who specializes in alternative investments and understands the unique requirements of self-directed IRAs.

A custodian who is familiar with private company investments will ensure that all transactions comply with IRS regulations. They are responsible for handling the administrative tasks involved, such as holding assets on behalf of the IRA and ensuring that all IRS reporting and record-keeping requirements are met.

For BDs and RIAs, advising clients on the selection of a knowledgeable custodian can have a smoother experience when investing in private offerings through their IRAs. It also helps clients avoid potential pitfalls related to IRS rules, which can be complex in this area.

Want to learn more? Click and get a FREE list of custodians now!

Keep an eye on Due Diligence!

Thorough due diligence is essential when evaluating private company investments for an IRA.  Private companies prior to the introduction of the JOBS Act regulation there was no mandatory requirement by a private company to provide disclosures.  Today, RegCF and RegA+ mandate disclosures to investors that is available to the general public just like public companies. 

BDs and RIAs should help their clients assess these key factors:

  • SEC Filings:  Review the full offering details of a company (RegCF, RegA+)
  • Business model: How does the company generate revenue? What is its path to profitability?
  • Management team: Review the leadership’s track record and experience.
  • Financial performance: Analyze the company’s financials to ensure stability and growth potential.
  • SEC-Transfer Agent:  How are the securities going to be managed, what oversight can the BD and RIA have once the offering is closed
  • Risk factors: Identify potential risks like market competition, regulatory hurdles, or reliance on key personnel.

Comprehensive due diligence reduces the risk of investing in companies that don’t align with retirement goals and ensures informed decision-making.

Tax Implications

IRAs offer tax advantages for investing in private companies, but it’s crucial to understand the tax implications. Unrelated Business Taxable Income (UBTI) can arise if the company generates income from certain business activities within the IRA. UBTI may create a tax liability, even in a tax-deferred account.

BDs and RIAs should inform clients about potential tax liabilities from private investments and discuss mitigation strategies. For example, clients can choose investments less likely to generate UBTI or structure investments to minimize exposure to taxable income.

By educating clients on these tax considerations, professionals can help them navigate the complexities of private company IRA investments while preserving the tax-advantaged status of their retirement accounts.

Attention! Prohibited Transactions

When investing in private companies through an IRA, be mindful of IRS rules regarding prohibited transactions. These rules prevent self-dealing or improper benefits between the IRA owner and their retirement assets. Violations can result in the loss of tax benefits and penalties.

Key examples of prohibited transactions include:

  • Self-dealing: The IRA owner personally benefits from the investment, such as using IRA funds to invest in a business they control.
  • Conflicts of interest: The IRA owner or family members directly profit from or influence the IRA’s investments.
  • Buying or selling property: Transactions with disqualified persons, such as family members.

Final Thoughts

Investing in private companies through RegCF, RegA+, and RegD offerings via IRAs can unlock opportunities for clients seeking to diversify their retirement portfolios. These investments offer potential tax benefits and access to private markets previously limited to a select group of investors.

FINRA Broker-dealers and RIAs can distinguish themselves as knowledgeable advisors by helping clients navigate self-directed IRA investments. Educating clients on the benefits, addressing custodian requirements, avoiding prohibited transactions, ensuring accurate valuations, and understanding tax implications provides real value.

Private company investments through an IRA allow clients to diversify their retirement savings, potentially increasing returns while adhering to regulatory guidelines.

What Corporate Actions does your Registered SEC Transfer Agent manage?

Posted on by Jason Futko Tags:

Partnering with a registered SEC transfer agent can be a game-changer for private companies. They handle key corporate actions that help keep your company compliant, streamline your paperwork, and strengthen relationships with investors. It’s like having an extra set of hands to manage the details so you can focus on growing your business!

Some of the more common corporate actions they might handle for your Private Company could include the following:

  1. Shareholder Record Maintenance: Keeping accurate and compliant shareholder records, ensuring all shareholder information is up-to-date and well-organized.
  2. Issuance and Transfer of Shares: Processing new stock issuances, transferring ownership, and ensuring proper record-keeping with all regulatory requirements.
  3. Dividend Distribution: Managing dividend payments, ensuring that eligible shareholders receive payments accurately and on time.
  4. Corporate Reorganizations: Handling mergers, acquisitions, stock splits, and reverse stock splits, ensuring shareholders are properly informed and records are adjusted accordingly.
  5. Stock Certificate Management: Issuing, canceling, and managing electronic or physical stock certificates and ownership documents.
  6. Capital Changes and Conversions: Handling changes in ownership or company structure, like swapping one type of stock for another, offering new shares to current investors, or making adjustments to the company’s financial setup to keep things balanced
  7. Proxy Management and Shareholder Voting: Organizing and managing shareholder voting, distributing proxy materials, and ensuring compliance with regulatory voting requirements.
  8. Shareholder Communication: Acting as a liaison between the company and its shareholders for any corporate updates, notices, or required disclosures.

These services make it easy for private companies to stay organized, follow the rules, and keep shareholders in the loop—especially helpful as the company grows or looks to bring in more investors or plan for a big exit.

 

Why Choose a Registered SEC Transfer Agent for Corporate Actions?

Selecting a registered SEC transfer agent is essential for companies aiming to manage their corporate actions professionally and securely. A reliable transfer agent provides expertise in securities regulations, assists with complex transactions, and protects both the issuer and investors by maintaining precise records.

Without the support of a qualified transfer agent, companies may face inaccuracies, compliance risks, and potentially even litigation due to mismanaged shareholder records. Failing to partner with a registered transfer agent can lead to delays in processing shareholder transactions, poor investor relations, and potential regulatory penalties​.

Building Stronger Shareholder Relationships Through Effective Communication

A transfer agent plays a key role in enhancing shareholder relationships by ensuring consistent, transparent communication. By managing shareholder inquiries, distributing voting materials, and providing updates on corporate actions, a transfer agent helps build trust and confidence among shareholders.

This clear communication ensures that shareholders are well-informed and engaged with the company’s direction, fostering a positive relationship that encourages continued investment​.

Registered SEC Transfer Agent in a Nutshell: What New Companies Need to Know

For new companies, understanding the role of a transfer agent is crucial. A transfer agent not only manages the transactions but also serves as a bridge between the company and its shareholders. With responsibilities that include maintaining the cap table, handling ownership transfers, and ensuring compliance with SEC regulations, a qualified transfer agent is essential for efficient corporate governance.

By maintaining accurate and up-to-date records, transfer agents provide companies with a strong foundation for growth and investor confidence, making them an invaluable partner for new and growing companies​.

Ready to Simplify Your Corporate Actions?

Partnering with Kore as your SEC-registered transfer agent provides more than compliance—it establishes a solid foundation for efficient shareholder management.

As your business grows and your shareholder base expands, Kore’s comprehensive transfer agent services help you maintain accurate records, process corporate actions smoothly, and communicate seamlessly with investors. With the advantages of a fully digital, blockchain-backed platform, Kore ensures your transactions are secure, your data remains up-to-date, and your company is prepared for all stages of growth.

Reach out today to learn more about how a registered SEC transfer agent can elevate your corporate actions and keep your business on track for success.

 

The future of private capital markets: Discover KORE ID

Posted on by Thiago

Kore has always been dedicated to advancing the technology landscape of private capital markets. Today, we’re unveiling a major enhancement to our platform— KoreID.

KoreID offers a streamlined, secure, and effective method for both investors and broker-dealers to access opportunities in private capital markets.

What is the KoreID platform?

KoreID is like a passport for private capital markets, allowing investors to log into multiple centralized or decentralized platforms without the need to repeatedly enter personal information. Here’s how KoreID stands out:

  • 1. Reduce investor fatigue: Eliminates the need for repetitive data entry, making the investment journey more straightforward and less tedious.
  • 2. Simplify the investment process: Streamlines onboarding and compliance steps, allowing investors to focus on opportunities rather than paperwork
  • 3. Save time and attract more investors: Speeds up access to investment platforms, encouraging more participation by creating an easy user-experience.

By addressing the core pain points of fragmented systems, slow onboarding, and repetitive compliance checks, KoreID is setting a new standard for investor convenience and operational speed.

This means a smoother experience, not just for the companies and investors, but also for the brokers who facilitate these transactions. It all ends in a positive loop, reducing the headaches associated with multiple logins and repetitive data entry.

How does KoreID work?

When an individual with a KoreID visits a participating platform within the Kore ecosystem – such as a company investment website, an SEC-Registered funding platform, a broker-dealer website, or a bank – the regulated investment forms can be filled in almost instantaneously. 

The platform automatically detects the KoreID and prompts the user for their credentials. All information is only provided as needed and as authorized by the individual. All of this happens securely within Kore’s KoreChain, the first SEC permission-based blockchain.

 

Is KoreID safe?

Yes, KoreID is a secure platform. All information is stored and transferred securely within KoreChain. To ensure compliance and security, companies participating in the KoreID ecosystem must meet strict requirements. For example:

  • Companies must show their SEC filings.
  • Broker-dealers must show their CRD registration.
  • Banks and funding portals must be in good standing with FINRA.

 

8 Things You Need to Know About the KoreID platform: Essential Benefits for Investors, Companies, and Broker-Dealers

Whether you’re an investor seeking greater control over your portfolio or a financial intermediary looking to streamline client engagement, understanding how KoreID can optimize your operations is a good start. 

Below, we explore key benefits of KoreID that every investor, company and ,broker-dealer should know about.

For Investors:

  1. Increased Adaptability: KoreID allows users to interact with various platforms without the need for repeated authentication, providing greater control over investment activities.
  2. Boosted Productivity: Transferring KYC information between platforms becomes much more straightforward, enabling quicker entry into new financial opportunities and reducing repetitive tasks.
  3. Better Clarity: Investors benefit from a unified view of their complete investment records, aiding in more informed portfolio management and decision-making.

For Companies 

  1. Accelerated Investor Onboarding: KoreID streamlines the KYC process, enabling faster onboarding of investors, which means less waiting time and a quicker path to capital raise.
  2. Access to a Broader Investor Base: With simplified compliance and automated processes, companies can engage with a larger pool of potential investors from different regions, increasing their funding opportunities.
  3. Enhanced Data Security: KoreID ensures that sensitive investor data is securely stored and transmitted, reducing risks of breaches and enhancing trust with stakeholders.

For broker-dealers:

  1. Accelerated Client Registration: KoreID automates the KYC and compliance processes, significantly speeding up client onboarding and broadening market involvement.
  2. Strengthened Client Relations: The user-friendly experience provided by KoreID supports intermediaries in building more meaningful connections with clients and encourages higher levels of investment activity.

 

Cost Savings for all the participants: Use Your Money Smart

KoreID delivers significant cost savings across the board, empowering investors, broker-dealers, and companies to make the most of their financial resources. By streamlining KYC processes, automating compliance tasks, and enhancing data security, KoreID helps you focus on growth and opportunity rather than spending on administrative overhead. Invest smartly, save wisely, and see the benefits flow throughout your entire financial ecosystem.

 

Discover more about how KoreID can help you optimize your operations at KoreID.

 

KoreID: From Beta Stage to the Future of Private Markets

The KoreID platform has been successfully beta tested by over 275,000 users, receiving positive feedback for its interface and integration capabilities. This marks a significant evolution in private capital markets, providing scalable and compliant solutions that fuel growth and open new opportunities.

Kore is committed to refining KoreID based on user input and industry trends, aiming to make private markets more accessible and efficient for all the participants.

We’re excited to lead this transformation, creating a future where accessing and managing investments is more intuitive, efficient, and interconnected.

 

Join us in transforming private capital markets! Sign up for KoreID today and experience the future of investment management.

 

How Nvatomate Revolutionizes Investor Acquisition 

Posted on by Thiago

It’s no secret that finding investors can be challenging. What worked in the past doesn’t quite cut it today. Despite the launch of increasingly sophisticated resources, data alone is not enough. Businesses are facing a more competitive and demanding market, which requires new strategies to survive, especially in the investor acquisition space. Companies need tools that not only help identify potential investors but also engage them in a meaningful way. This is where Nvatomate steps in, bridging the gap between raw data and smart actions.

During a recent interview with the Kore Team, Nate Latimer, CEO of Nvatomate, shared insights that will expand your point of view about how companies can effectively attract investors by using data and technology together in smarter ways.

“What I realized is that not everyone is a data scientist. You can sell people marketing lists or audience databases, but many don’t know how to make sense of all that information,” Nate explained. He founded Nvatomate to transform big data into big tech—offering not just the raw fuel (data) but also the vehicle (technology) to drive investor acquisition​.

From Data to Action: Nvatomate’s Approach

Nvatomate originally started by providing large datasets on consumers and business executives, focusing on demographics, financial attributes, and even lifestyle or purchasing behaviors. But what makes them stand out is how they use this data for capital-raising companies.

For businesses trying to raise funds, Nvatomate custom-builds an audience of potential investors, narrowing the pool down to those who are most relevant and likely to invest. They then use their proprietary tech platform, N’gauge, to target these investors with automated email and social media campaigns. “We’ve flagged 82 million investors over time, and currently have about 33 million active investors who have visited investment-related pages within the last 90 days,” Nate said​.

This isn’t just another CRM tool—what sets Nvatomate apart is their ability to use the data not only for nurturing existing relationships but also for prospecting new ones. Most CRM systems limit you to working with contacts you already have, but Nvatomate goes beyond that by feeding their massive datasets into a prospecting campaign​.

Simplifying the Investor Journey

One of the biggest pain points for companies trying to manage marketing efforts is the overwhelming amount of platforms and processes involved. With Nvatomate, all of that is streamlined. Whether it’s email, social media, or campaign analytics, businesses no longer need to toggle between various systems.

“It can be overwhelming for companies to log into Facebook, Twitter, or Instagram separately just to run a campaign. We’ve simplified that by offering a centralized environment where everything can be tracked—from email opens to social media clicks. You can even schedule 30 days’ worth of posts in a single day”.

By consolidating the different parts of a campaign into one easy-to-use platform, Nvatomate offers businesses more control and clarity. It allows them to see what’s working in real-time and make data-driven adjustments as needed, saving both time and effort.

Automating Success

Automation is a key component of Nvatomate’s service. The platform offers AI-driven workflows that automatically guide leads through a funnel, ensuring continuous engagement with potential investors. Nate emphasized the importance of follow-ups, especially in the capital-raising world: “We know from experience that it typically takes around six touches to convert an investor, so our system keeps those follow-up emails and ads coming until the time is right for them to invest,” he said​.

Their system also supports remarketing, so if someone has clicked on an email but didn’t follow through, they’ll see targeted ads on social platforms like Facebook or Instagram. This kind of consistent visibility keeps companies top-of-mind, significantly increasing the chances of conversion​.

The Future of Investor Acquisition

Nvatomate’s recent partnership with Kore will take their service to the next level. Combining Kore’s deep infrastructure in the private capital markets with Nvatomate’s powerful tech and data tools means businesses will have an even greater advantage when it comes to investor acquisition.

“What excites me most about partnering with Kore is their ability to educate businesses about the capital raise process. Many people just don’t know where to start. Kore bundles everything together, from choosing the right offering structure to handling legal compliance. Our role at Nvatomate is to move things faster by driving the right investor eyeballs to the page,” Nate explained​.

Looking ahead, Nate sees the future as an exciting space where companies like Kore and Nvatomate will revolutionize the investor acquisition process. “In five years, I foresee a world where businesses like Kore, Nvatomate, and RaiseX act as the new venture capitalists, but on a much more democratic scale. We’re not just helping businesses raise capital—we’re also amplifying their brand by getting them in front of millions of eyes,” Latimer concluded​.

Kore is excited to announce the partnership with Nvatomate, expanding the power of the KoreEcosystem. This collaboration enhances our comprehensive suite of tools designed to simplify and secure your capital-raising process. Ready to explore how it can work for you? Let’s connect and see if we’re a good fit.

 

Whether you’re a company raising capital or an intermediary like a broker-dealer or funding platform, we offer tailored solutions to meet your specific needs. Book a call with our experts today to unlock the possibilities and discover how the KoreEcosystem can support your goals.

 

KoreGlossary: Decoding Private Capital Markets

Posted on by Thiago

If you’ve ever felt slightly overwhelmed by the specialized language of private capital markets, you’re not alone. Industry terms can sound foreign, especially to newcomers or those shifting from related fields.

That’s where KoreGlossary steps in—a resource designed to clarify and decode the complex world of private capital terminology.

What is KoreGlossary?

KoreGlossary is an online glossary offered by Kore, crafted specifically to demystify the vocabulary of private capital markets. This glossary is designed for everyone involved in the private capital market ecosystem—investors, entrepreneurs, fund managers, legal and compliance teams. It offers easy-to-understand definitions, making even the most intricate terms accessible to all participants.

Why is KoreGlossary Important?

In private capital, understanding terms accurately is essential for making sound decisions, maintaining compliance, and fostering strong relationships among all parties. The industry operates on a network of complex transactions, agreements, and regulations. KoreGlossary simplifies these complexities by offering definitions that are clear, reliable, and industry-specific.

How KoreGlossary Benefits Key Private Capital Stakeholders

➡️ Comprehensive Reference: KoreGlossary provides definitions tailored to private capital, making industry language accessible and understandable.

➡️ Supports All Stakeholders: Investors, fund managers, compliance officers, and legal teams can use it to build a stronger foundation in private capital markets vocabulary.

➡️ Enhanced Decision-Making: Clear definitions allow participants to make well-informed, confident choices in complex financial settings.

➡️ Educational Resource: KoreGlossary acts as a teaching tool for those new to private capital, providing clear, concise explanations.

➡️ Confidence in Compliance: Simplifies regulatory terms, helping compliance teams stay well-informed and aligned with industry standards.

 

KoreGlossary as a Learning Tool

KoreGlossary is more than just a dictionary; it’s an educational tool. As private capital markets become more accessible and attract participants from diverse backgrounds, the need for a shared language grows. By providing clear, straightforward definitions, KoreGlossary fosters an inclusive environment for everyone, from seasoned professionals to those just stepping into the world of private capital.

Let’s say you’re a newcomer to private capital markets, perhaps an investor who traditionally focused on public equities. Terms like “due diligence” or “carry” might sound familiar, but their nuances in private capital can differ. KoreGlossary helps bridge this gap, allowing you to participate with the confidence of a seasoned investor.

Boosting Confidence and Collaboration in Private Capital Markets

Private capital markets are relationship-driven, and clear communication is the bedrock of those relationships. With KoreGlossary, participants can use terms with confidence, knowing they have a reliable source to clarify and validate their understanding. Whether negotiating terms or planning strategies, clear definitions contribute to a smoother process for all parties involved.

In an industry where stakes are high, KoreGlossary acts as a quiet yet powerful tool. It helps turn the private capital market’s language from a potential barrier into a bridge, connecting people with the information they need to thrive.

So, the next time you come across a new term in private capital, remember that KoreGlossary is here to clarify the terminology, supporting you in making informed decisions every step of the way.

KoreSummit The Rise: A New Era For Broker-Dealers

Posted on by Thiago

Expert insights and Knowledge for all – KoreSummit The Rise

In its ongoing journey of sharing educational content for the private capital markets, KoreSummit continues to excel.

This was especially clear in October 2024, as the event featured not just one but two sessions per day. It was a time of great learning and networking for all audiences. Broker-dealers (BDs) connected through KoreSummit The Rise, while investors benefited from KoreSummit The Power of Investor.

Today, we’ll be sharing highlights from KoreSummit The Rise, and in future posts, we’ll cover KoreSummit The Power of Investor.

It all started with the session “The Rise | Seizing the $150 Billion Opportunity”. 

During the session, Oscar Jofre hosted a talk with David Weild IV, Patrick Costello, and Mitch Avnet.

The session was filled with valuable discussions and insights that are not often highlighted, such as Weild’s remark: “Interestingly, the JOBS Act stands as the only pro-Capital Access legislation enacted in the past 84 years.”

They also explored the balance between technology and human oversight in the broker-dealer space, with insightful contributions from Mitch Avnet and Patrick Costello.

Another key focus was the role of compliance expertise and operational readiness in Private Capital Markets activities, which is essential for ensuring regulatory adherence and protecting investor interests.

Understanding the best of Technology for BDs

In the panel “Harnessing Technology: How Broker-Dealers Can Save Time and Increase Efficiency” we had two great guests. Sara Judd, COO at North Capital and Marty Tate of KB&A Law.

The focus was to discuss how technology is helping broker-dealers be more efficient when raising capital under the Jobs Act.  During the talk, Sara Judd pointed out that they’ve handled over 850,000 primary issuances and verified 41,000 accredited investors, showing how tech can really scale operations. 

Marty Tate also explained some rules for Reg CF, Reg A, and Reg D, emphasizing how important compliance is and the role of broker-dealers in protecting investors. Another point that’s worth checking is their highlights on challenges like working with different service providers. Managing data properly, and keeping up with stricter advertising and compliance rules are crucial for the success of the offering.

KoreSummit: The update every broker-dealer should have

Now that you’ve had a glimpse into the high-level content offered at KoreSummit, this is just the beginning.

Knowledge is power, and staying informed is key to staying ahead. Catch the full sessions from KoreSummit The Rise on YouTube and discover how you can save time, streamline operations, and better serve your clients.

What is a SAFE Note and other financial instruments?

Posted on by Jason Futko

What is a SAFE Note?

A SAFE Note (Simple Agreement for Future Equity) is a straightforward financial tool used by startups to raise money. Created by Y Combinator in 2013, it’s a simple agreement between the investor and the startup. Unlike traditional loans or bonds, a SAFE doesn’t charge interest or have a specific time frame for repayment. Instead, it offers investors the chance to convert their investment into equity (ownership) when the company reaches certain conversion triggers, such as a priced round of funding or other liquidity events, which are predefined in the SAFE agreement.

CrowdSAFE

CrowdSAFE is an adaptation of the traditional SAFE note, designed specifically for equity crowdfunding platforms. It follows the same basic principles as a SAFE but is tailored to work in a crowdfunding environment where many small investors come together to fund a startup. CrowdSAFE is typically used in equity crowdfunding under Regulation CF, part of the JOBS Act, which comes with specific compliance requirements.


Both of these SAFE type instruments are designed to reduce the burden of managing multiple shareholders on a company’s cap table.  Since they are not shares and do not have individual voting rights companies do not have to face issues with voting as they would with traditional share issuances.

The investors in these instruments benefit from the growth in the company’s valuation based on a discount or valuation cap placed on their conversion from SAFE into shares.  Conversions are triggered by some specified future events such as the next round of financing, going public, sale of the company or its assets.

 

SAFE Notes vs. Convertible Notes


SAFE notes and convertible notes are often mentioned in the same breath because they serve similar purposes—they both convert into equity at a future event. However, there are some key differences:

  • Debt vs. Non-Debt: A convertible note is essentially a loan to the startup. It accrues interest, and it has a maturity date. If the startup doesn’t raise a qualifying round of funding or reach a specific milestone, the note could become due, requiring repayment. In contrast, a SAFE is not a debt instrument. It does not accrue interest and doesn’t have a due date, making it less risky for startups. However, SAFE notes do not obligate the company to repay the investor if no conversion event occurs, making them higher risk for investors compared to convertible notes.
  • Complexity: Convertible notes can involve more legal complexity and require negotiation over terms like interest rates, conversion terms and maturity dates. SAFE notes, on the other hand, are much simpler, with fewer variables to consider, making them more appealing for early-stage companies.
  • Risk to Investors: For investors, convertible notes might offer slightly more protection because they have a clearer claim on the company’s assets if things go wrong. SAFE notes are more of a gamble on the future, betting that the company will eventually become valuable enough to convert the agreement into worthwhile equity.

 

Other Financial Instruments

Besides SAFE and convertible notes, there are other financial tools that investors and startups and investors can use to structure their fundraising deals. Each has its unique features, helping companies to choose the approach that best aligns with their needs.

Keep reading and expand your knowledge discovering more about other financial instruments like options, warrants, promissory notes, ICOs and STOs.

It is important to keep in mind that there is still a market for private company shares, whether common or preferred shares.  Shares usually offer investors influence on the company through voting rights and provide an opportunity to participate in dividends (if declared and depending on the security’s rights) or upside in the stock price on any future exit events. Private company shares usually carry some form of trading restrictions depending which regulation they were issued under, so always look at the details.

 

Options and Warrants

Options and warrants give investors the right to purchase a company’s stock at a set price by a certain future date. While they may sound similar, there are differences between the two:

  • Options are usually offered to employees or advisors as part of a compensation package. They serve as incentives, encouraging employees to help grow the company’s value so they can eventually purchase stock at a favorable price.
  • Warrants, on the other hand, are often issued to investors or broker-dealers. They allow investors to buy more shares in the future, typically at a price agreed upon at the time of the investment. Warrants can be a great way to sweeten a deal for investors who want to share in the company’s growth.

Promissory Notes

A promissory note is a simple financial instrument where the startup agrees to pay back a specific amount of money to the investor by a certain date, often with interest. Unlike SAFE notes or convertible notes, promissory notes don’t automatically convert into equity. They are straightforward debt agreements. Promissory notes are useful for startups that need quick cash but are not ready or willing to offer equity. They’re also attractive to investors looking for a lower-risk, fixed return on their investment.

Initial Coin Offerings (ICOs) and Security Token Offerings (STOs)

With the rise of blockchain technology, new forms of fundraising have emerged, including Initial Coin Offerings (ICOs) and Security Token Offerings (STOs):

  • ICOs involve creating and selling digital tokens to investors, who typically buy them using cryptocurrencies like Bitcoin or Ethereum. Investors hope the value of these tokens will rise as the startup grows, similar to buying shares in a traditional market. However, ICOs have faced increased regulatory scrutiny, particularly by the SEC, who tend to view these as securities.
  • STOs (or digital securities as they are often referred), offer tokens that are backed by real assets like company equity or revenue streams. They are subject to more regulations and are generally considered safer than ICOs. STOs are subject to compliance under securities laws such as Regulation D or Regulation A+.

These methods allow startups to tap into a global pool of investors, opening up more opportunities for funding. However, they also come with increased scrutiny and legal requirements.

 

Understanding Your Options


SAFE notes and convertible notes provide distinct benefits for startups looking for funding. It’s important to evaluate your situation and seek advice from financial experts to find the right financing choice for your business. By knowing the different options, you can make smart decisions in the challenging area of startup financing.

Whether you’re a startup founder or an investor, understanding these financial instruments can help you navigate the complex world of fundraising with confidence and clarity.

 

Disclaimer: Investors, issuers, and investment professionals are encouraged to conduct their own research and consult with legal counsel before utilizing any financial instruments. Kore is not responsible for any decisions made or actions taken based on the use of these instruments. Please note: This information is for informational purposes only and should not be considered legal or investment advice.

Cross-checking staff credentials: lessons for issuers, portals and investors

Posted on by Sara Hanks

In the world of fundraising, especially in Regulation Crowdfunding (Reg CF) offerings, transparency and accuracy are essential. The following is a true and recent story, though names and details have been changed for privacy. It highlights the importance of due diligence for companies, platforms, and investors alike, to avoid potential misunderstandings or misrepresentations during the capital-raising process. Let’s dive into the story and discover the impact of cross-checking staff credentials.

A Company raised funds in a Reg CF offering on “SuperPortal”. Company had a pretty lean team, but listed Freddie Finance as its CFO in its Form C. Freddie made no reference to Company in his LinkedIn profile, which was pretty impressive. When contacted, Freddie said he wasn’t the CFO but had given Company a bit of advice on fundraising in the past.

So you can decide for yourself what issues this raises, and for whom, but let’s look at how to avoid this kind of thing.

Lessons for issuers: If you list someone as part of your team, make sure that person does actually perform that function, and is ok with you saying that’s what they do, and is not going to respond “Nope, they are nothing to do with me,” if anyone checks up.

Lesson for portals: Do some elementary cross-checking on team members. If someone is listed as an officer or director, check they have been appointed as such by the issuer. And if their LinkedIn profile doesn’t show them as such, ask why. Additionally, you (or someone on your behalf) will be running Bad Actor checks on officers and directors, so presumably you will be telling those people directly why you are running a check on them. Right?

Lesson for investors: If you are thinking of investing in a company based on the quality of their team, make sure the team is as advertised. If there’s a discrepancy, use the intermediary’s chat function to ask the company what’s up, and treat a non-response as a red flag.

It’s always good to remember: All parties involved share the responsibility of maintaining accuracy and transparency. Cross-checking staff credentials is an essential step!

How to attract accredited investors?

Posted on by Thiago

Attracting accredited investors can be challenging, but it’s definitely possible. With smart strategies and the right tactics, you can increase your chances of success. Under the  JOBS Act regulation, specifically through Regulation D, Rule 506(c)¹, companies can publicly advertise their offerings, opening up new opportunities to attract accredited investors.

Accredited investors can also join Regulation Crowdfunding (Reg CF) and Regulation A (Reg A)² offerings, but unlike Reg D, Rule 506(c), they don’t need to prove their accredited status. This makes Reg CF and Reg A great options for raising capital from a wider range of investors while still attracting accredited investors.

On that note, regardless of the regulation you choose, it’s essential to tailor your approach when reaching out to high-net-worth  strategic investments. Your pitch deck should clearly communicate your value proposition and growth potential to capture serious interest.

Read on to discover the special tips we’ve prepared for companies raising capital or planning to do so in the Private Capital Markets.

 

Crafting a Message That Resonates with Accredited Investors

When engaging with accredited investors, your message needs to both compelling and credible. These investors aren’t just interested in a great idea—they want to see how your offering fits within the market and delivers a clear return on investment (ROI). Crafting a message that resonates with this audience involves focusing on credibility, transparency, and the long-term value your company provides.

Transparency and Credibility Are Key

To capture the attention of accredited investors, transparency is non-negotiable. Investors need to trust that you have a well-thought-out business strategy and a clear plan for how their investment will drive growth. hey need to trust that you’ve done the homework, with a clear business plan and data that supports your growth potential. Verifiable metrics build confidence. 

  • Highlight key performance indicators (KPIs) that show a clear path to ROI, such as:Revenue Growth: Show steady or accelerating growth over time, which suggests your company is on a solid growth trajectory.
  • Customer Acquisition Cost (CAC): Investors want to see that you can efficiently acquire customers relative to the revenue they bring in.
  • Market share: Highlighting your company’s position in the market can demonstrate your competitiveness and potential to scale.

In addition to these metrics, a well-structured financial model with realistic projections is critical. This shows investors you’ve done the work to ensure the business can sustain and grow. For example, if you’re a SaaS company, emphasize key metrics like:

  • Monthly Recurring Revenue (MRR): This gives investors insight into predictable, consistent cash flow.
  • Customer Lifetime Value (CLTV): Demonstrates the long-term revenue potential from each customer and the stickiness of your product.

By presenting a combination of clear KPIs and a solid financial model with realistic projections, you build credibility, make your offering more tangible, and inspire confidence among investors looking for strategic growth opportunities..

Expanding Your Reach Through Online Networking

In today’s digital age, online networking is one of the most effective ways to engage with accredited investors. Having a strong online presence not only expands your reach but also allows you to showcase your expertise and connect with potential investors on platforms they are in. The key to online networking is building and nurturing professional relationships that can eventually lead to investment opportunities.

Can I find investors through LinkedIn for my startup?

Absolutely. Optimizing your presence on these platforms is crucial to make a strong first impression. Here are some tips for ensuring your profile stands out:

 

Tip Details
Maintain a Professional Profile Ensure your personal and company profiles are polished, up-to-date, and reflect your brand. Include clear information about your company’s mission, leadership, and accomplishments.
Highlight Key Experience Investors are interested in your track record. Emphasize past achievements, partnerships, and projects that show your capability in running and expanding the business.
Update Content Regularly Share thought leadership articles, case studies, and insights regularly. Consistently updating your content positions you as an expert and keeps your profile dynamic and engaging.

 

❗ Remember to engage authentically on LinkedIn (and other platforms)

Online networking goes beyond a well-crafted profile—it’s about building real connections. Engage authentically by commenting on relevant posts, sharing helpful insights, and asking thoughtful questions in industry groups. Genuine interactions build trust, which is just as important as presenting a sleek company page. Networking with accredited investors is about showing your expertise and authenticity in equal measure.

 

Participating in Strategic Events

While online networking is crucial, in-person and virtual events remain powerful tools for connecting with accredited investors. These events offer a platform to showcase your business, network with industry leaders, and foster relationships that could lead to future investments. By attending high-value, targeted events, you can boost your visibility and credibility among the right investors.

 

3 Steps to Target the Best Events to Attract Investors

  • Research attendee demographics: Look into the typical attendee profile of the conferences you’re considering. Prioritize events where accredited investors, venture capitalists, and industry experts are likely to be present.
  • Focus on relevant industry sectors: Choose events that cater to your industry or sector. This increases the chance of meeting investors who are interested in your market and have experience investing in similar businesses.
  • Prepare a concise pitch: Conferences are an opportunity for direct interaction, so prepare a clear, concise pitch that outlines your value proposition. Tailor your message to the audience, focusing on how your business aligns with their investment goals.

Extra Tip: Develop a Strong Elevator Pitch

An elevator pitch is a brief, attention-grabbing summary of your business, typically 30 seconds or less, designed to spark interest. Think of it as a hook to pique investors’ curiosity, enticing them to ask for more details. A well-crafted elevator pitch is essential for standing out in fast-paced environments like conferences or networking events, where first impressions are key. It’s your opportunity to make an immediate impact and open the door to a deeper conversation.

Hosting Events to Strengthen Your Authority

Besides attending, hosting events can further establish your authority and attract investors:

  • Educational Webinars: Host webinars on industry-relevant topics to position yourself as an expert while subtly introducing your offering.
  • Partner with Experts: Collaborating with known figures in your sector can add credibility and draw more attendees.
  • Engage with Attendees: Always follow up with key participants to foster relationships and maintain momentum.

By targeting relevant events and engaging meaningfully, you increase visibility and build relationships that could lead to future investments.

 

Join Industry-Specific Clubs and Associations 

Becoming a member of industry-specific clubs and relevant professional associations can significantly elevate your visibility among accredited investors. These organizations bring together influential figures who are often on the lookout for promising investment opportunities. Membership not only provides access to valuable networking events but also enhances your credibility by associating your business with respected industry bodies. Investors take note when a company is aligned with reputable organizations, giving you a stronger foothold in gaining their trust.

 

Leverage Your Network for Strategic Introductions and Partnerships 

Your existing network is one of your most valuable resources. Tap into it to gain introductions to investors, advisors, or potential partners who can accelerate your business growth. Warm introductions from trusted contacts carry more weight and can lead to deeper conversations and opportunities. Additionally, focus on forming partnerships that benefit all sides—whether through collaborations, joint ventures, or shared resources. These alliances can enhance credibility, open new markets, and create long-term growth opportunities for everyone involved.

Transforming Connections into Capital

Attracting accredited investors requires a strategic approach that goes beyond presenting an opportunity—it demands a strategic approach. Success hinges on your ability to craft a compelling message that resonates with them, build a strong online presence, and participate in strategic events that connect you with the right audience. Also, joining industry clubs enhances your credibility and positions you with key players, while leveraging your network for introductions and forming mutually beneficial partnerships can further strengthen your capital-raising efforts.

 

Remember, this is all about building long-term relationships based on trust, professionalism, and clear communication. By focusing on these strategies, companies can effectively engage accredited investors and drive business growth.

 

If you’re planning your next capital raise and want to explore your options, talk to our experts. We’ll connect you with the right strategic partners and provide the tools for a successful fundraising journey.

¹Regulation D, Rule 506(c) allows businesses to engage in general solicitation, meaning they can market their capital raise through various channels such as online platforms, social media, and events. However, companies must ensure they verify that all participating investors meet the SEC’s definition of an accredited investor, which typically includes individuals with a net worth of over $1 million (excluding the value of their primary residence) or an annual income of at least $200,000 (or $300,000 jointly with a spouse) for the past two years. By adhering to these compliance requirements, businesses can significantly broaden their investor base while staying within the regulatory framework. They must always consult with legal or financial advisors to confirm you are complying with all applicable regulations.

 

²In Reg CF and Reg A offerings, accredited investors can participate without verifying their status, unlike in Reg D, Rule 506(c). Non-accredited investors have limits based on income and net worth, while accredited investors face fewer restrictions, allowing them to invest larger amounts. This flexibility makes these regulations attractive to companies because they can access a broader audience while benefiting from the significant capital that accredited investors can provide. This dual approach allows businesses to raise more funds efficiently, combining the benefits of widespread participation and high-net-worth contributions. Always consult legal or financial advisors to ensure compliance with each regulation.

What is a Transfer Agent for Private Companies, and How Do They Work?

Posted on by Amanda Grange Tags: , ,

Managing ownership and tracking shares can quickly become complicated for private companies issuing stock or other securities. This is where a transfer agent comes in. Although often associated with public companies, transfer agents also play a crucial role for private businesses. Let’s explore what transfer agents do and how they help private companies manage ownership records.

What is a Transfer Agent?

A transfer agent is responsible for maintaining accurate records of a company’s ownership and ensuring proper documentation when shares are bought, sold, or transferred. They help companies stay compliant with SEC regulations and ensure all ownership changes are properly recorded.

Private companies require transfer agents in the following situations:

  • Regulation A+ (Tier 2) offerings
  • Regulation Crowdfunding (Reg CF) securities offerings
  • Publicly traded shares (e.g., OTC markets)
  • Securities registered under the Securities Exchange Act of 1934
  • Large shareholder bases triggering SEC reporting obligations
  • Issuing restricted securities (requiring Rule 144 compliance)

Given the complexities of SEC rules and the path to going public, companies are encouraged to consult transfer agents early to ensure compliance and understand their options and obligations .

What Does a Transfer Agent Do for Private Companies?

Although private companies might not handle the same volume of shareholder transactions as public companies, transfer agents still perform essential tasks:

    • Maintain Shareholder Records: Keeping an accurate, updated list of shareholders and documenting changes, which is critical for growth or attracting investors.
    • Process Share Transfers: Managing the paperwork for buying, selling, or transferring shares to ensure all records reflect ownership changes.
    • Issue Stock Certificates: While digital records are common, transfer agents can issue physical stock certificates for shareholders who prefer them.
    • Manage Dividends: Ensuring shareholders receive accurate and timely payments for dividends or other distributions.
    • Communicate with Shareholders: Handling updates, meeting notices, or information on corporate actions like stock splits.
    • Ensure Compliance: Helping companies navigate the rules and regulations of issuing or transferring shares, especially when preparing for growth or going public.
  • Assist with Annual General Business Meeting  A Transfer Agent for private companies plays a key role in assisting with the Annual General Meeting (AGM) by handling various logistical and administrative tasks related to the company’s shareholders and records. Here’s how they typically assist:

Why Would a Private Company Need a Transfer Agent?

Managing ownership records can get complicated as a private company grows. A transfer agent simplifies this process by:

  • Ensuring Accuracy: Avoiding costly mistakes in shareholder records, which can lead to disputes or delays.
  • Saving Time: Offloading the responsibility of managing ownership changes, freeing up leadership to focus on other tasks.
  • Planning for Growth: Making it easier to attract investors and efficiently handle ownership changes as the company raises capital or expands.

Key Takeaways for Private Companies

From my experience as a Transfer Agent, I’ve seen many private companies wait until it’s almost too late to hire one—usually when they’re required by SEC guidelines. But waiting that long can slow down your company’s growth or even delay going live with a raise. Having this kind of professional in your team helps ensure your records are ready for filing, but it’s not just about finding any agent—it’s about finding the right one for your company’s specific needs. Taking this step early can really help keep things moving smoothly and set you up for success in the long run.

At the end of the day, transfer agents help private companies stay organized as they grow. a valuable partner in keeping everything on track and prepared for the future.

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