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Regulators are paying increasing attention to firms’ compliance structures to ensure there is a system of control and supervision in accordance with securities rules and regulations. The system should include internal procedures to detect non-compliance and contain remedies to resolve these issues. By implementing online technologies to assist and make compliance more efficient.

Here’s what should be part of your compliance system.

1. THE NATURE OF THE FIRM’S BUSINESS ACTIVITIES

This includes the products you sell, who has responsibility for what, and the types of clients you serve. The key personnel that should be in charge are the Ultimate Designated Person (UDP) and Chief Compliance Officer (CCO). The role of UDP lies with the CEO of the firm or the individual acting in a similar capacity. The UDP must ensure there are sufficient resources dedicated to compliance, show visible commitment, foster a culture of compliance and oversee the system. This is done by having regular contact with the CCO on compliance issues and communicating to staff its importance and the risks of failing to adhere to their obligations. This person doesn’t need to be involved in day-to day compliance issues — that responsibility falls to the CCO, who must meet the applicable proficiency requirements.

2. SPECIFIC CONTROLS TO MINIMIZE RISK AND PROTECT CLIENT ASSETS

You can mitigate potential risks by having accurate books and records, ensuring trading is closely monitored, managing conflicts of interest, and having procedures to detect money laundering (AML). Firms must determine areas of non-compliance and have a structure to remediate these problem areas. Day-to-day monitoring includes reviewing trading, approving new account applications and reviewing marketing materials to ensure that the disclosure conforms to securities regulations. The size and scope of the firm will determine how closely involved the CCO needs to be, as certain activities may be delegated to other employees. The CCO may delegate the creation of marketing material, the preparation of regulatory filings and the initial review of a client complaint to Branch Managers or other staff within the Compliance Department. However, the CCO must sign off on all final documentation.

3. A COMPREHENSIVE POLICIES AND PROCEDURES MANUAL

This guide ensures that everyone understands the steps the firm needs to take to function effectively. It should be tailored to actual operations, and closely reflect the firm’s business activities. The manual should set out who does what and when, the steps for new account opening procedures, trading policies, how research is conducted, and what books and records need to be kept. And when conducting these activities, firms must clearly document their actions because that’s what regulators look for when they conduct an audit. It’s not simply a matter of doing it properly; it’s about showing you’ve done it in accordance to internal policies and securities regulations. This includes keeping a folder of marketing material and having the CCO approve each communication. The folder should also include employees’ disclosures of outside business activities, and those disclosure documents should indicate senior management approval where applicable.

4. CCO ANNUAL REPORT.

The CCO is required to provide this report to the board of directors, detailing the firm’s adherence to its compliance responsibilities. It should include what legislative changes took place in the past year, and how the firm made the necessary adjustments to comply. The CCO must reveal whether there have been instances of non-compliance, how they were dealt with, and what future obligations the firm must meet. When a regulator does an audit, being forthcoming will indicate that your firm is serious about its compliance responsibilities.

Maintaining an effective system is a firm-wide responsibility. Each employee must keep compliance in the forefront of their minds to fulfill the requirement in order to operate in the best interests of clients.

Till now accomplishing the compliance requirements had been daunting task for compliance professionals and costly for firms.  Today the tools are available for compliance teams to accomplish these regulated tasks.

Typically we have seen compliance tools solely for the backend of the firm but now we have companies like KoreConX which provides a compliance platform that manages both the KYP, KYC and the compliance process around both.  This by far reduces the cost for a firm to have all its information centralized and accessible, which can be very advantageous at audit time or regulatory reporting.

Advisors have a duty to act fairly, honestly and in good faith with clients. To meet these obligations, they must know their clients, understand the products they sell them and ensure investments are suitable.

KNOW YOUR CLIENT (KYC)

Having clients complete a basic KYC form isn’t enough. You also need to make detailed notes about client discussions. This will help protect you in the event of a dispute. CSA lets you accept client statements at face value unless you have good reason for doubt. According to Staff Notice 31-336, “A person may rely on factual representations by a purchaser, provided that the person has no reasonable grounds to believe the representations are false.” So, if a client has significantly more money than you’d expect given where he works, for instance, you need to discover and document where the money’s coming from before doing any trades.

Regulators don’t provide a list of documents you need to obtain from clients. Advisors have to have a sense of what’s needed to paint a complete picture of the client’s financial situation.

This is especially important if you have Accredited Investor (AI) clients. They must demonstrate they meet annual income and asset thresholds to be eligible for certain types of investments, including prospectus-exempt products. Having these clients sign subscription documents stating they’re AIs simply isn’t enough.

Consider formulating a supplemental, plain-language questionnaire with specific queries about the client’s financial picture. This will help ensure you aren’t missing any important details; it will also help compliance determine if a trade is suitable. Ask about clients’ ultimate financial goals (e.g., saving for retirement, paying off loans, buying a cottage).

Having an idea about how much money they need, and by when, will assist in choosing the right investments. Understanding risk tolerance by asking a client how concerned they would be if an investment dropped in value by 20% over a six-month period will give a better picture of how much risk they really could withstand. This is far more pointed than having a client say their risk tolerance is low, medium or high, which is how most KYC forms characterize risk. Regulators also expect you to ensure client information is up to date. Contact clients at least once a year to confirm or revise your files.

KNOW YOUR PRODUCT (KYP)

Advisors must understand the products they sell. The firm needs to review offering documents and marketing materials to ensure they meet regulatory requirements.

It’s also important to do a risk and cost assessment that includes a comparison with similar products. If other offerings are less costly and risky, it may be appropriate not to approve the product under review. To be approved, a product should have a reasonable prospect of meeting its objectives and be suitable for client portfolios.

Firms may use third-party analysis as part of their due diligence on a product, but this doesn’t replace an internal review. Advisors must be trained on a product’s specifics before they can recommend it. Advisors should ask questions covering the features, structure and risks of the products approved for sale. They should also know about competing products to be able to show why one is more suitable than another. As with KYC, each step of this process must be documented. Imagine the regulator auditing your firm in three years. Do your files justify all recommendations?

SUITABILITY

The products you recommend must be suitable for clients. This is particularly important for firms dealing in prospectus-exempt offerings, because these investments are typically more illiquid and may have to be held for longer.

Firms that have a related-party relationship with an issuer must ensure they’re putting client interests first. And just because a client is eligible for an investment doesn’t mean it’s suitable. A client may be an AI, but if she needs to access her money in the short term to buy a property, an illiquid product wouldn’t be suitable.

Since these investments are generally high-risk, avoid allocations of more than 10% of client assets. There are no specific regulations governing the concentration of assets in specific investments, but the Regulators will look long and hard at advisors who invest too much in too concentrated assets, particularly illiquid ones. Compliance should review all trades to ensure suitability.

There is a lot of media focus on crowdfunding, but sometimes the types of crowdfunding are not properly distinguished. You hear a lot about the Kickstarter’s and Indiegogo’s of the world and people are confusing these with actual investments in companies. To understand debt (lending) vs. equity based crowdfunding you must first know the four basic types of crowdfunding:

• Donations based crowdfunding is being used by major charities and by individuals who are asking for donations to their cause. Examples of these types of portals include: GoFundMe, Crowdrise.com
• Rewards based crowdfunding is one the most popular and widely used versions to date. This is where individuals and companies are seeking contributions in order to develop and launch a new product. These have been very successful with films and new technology or products ideas that need funding to launch. It needs to be clarified that under rewards based campaigns the contributors do not receive shares in any of the companies, but rather receive some reward (such as a version of the new product once developed, a T-shirt or trinket, a DVD version of a film, etc.). Examples of these types of portals include: Kickstarter, Indiegogo
• Equity based crowdfunding has been getting more and more attention over the last year with the JOBS Act in the U.S.A. and other regulators around the world releasing regulations to allow equity (and debt) crowdfunding. Under these regulations some serious funds have been raised to date and this is expected to grow rapidly over the next few years. In equity crowdfunding companies raise money through investors who receive shares in the company in exchange. Examples of such portals include: OfferBoard, CircleUp, OurCrowd, ASSOB.com.au, AppVested, I-Bankers.com, CrowdCube, Symbid, Crowdfunder.com, EnergyFunders, KlondikeStrike
• Debt based crowdfunding is where lenders are able to provide needed debt financing and the lender receives a debt instrument that pays interest return. Examples of these types of portals include: Prosper, Funding Circle, LendingClub

So what is the difference between equity and debt crowdfunding and why is there confusion? The biggest confusion is over the types of crowdfunding as briefly explained above. Even the media has confused these in the past. Generally people lump debt and equity crowdfunding into one category and call them both equity crowdfunding. They are lumped together because both equity and debt crowdfunding are regulated in much the same way, whereas donations and rewards are unregulated.

Regulators around the world have had rules to regulate the sale of securities for a long time. Since both equity and debt financing fall under the term security, they must be regulated to protect the public from fraud and scams. This is why equity and debt crowdfunding has taken longer to be released around the world as regulators have had to revise their local securities regulations and corporate legislation to allow securities to be crowdfunded.

As an investor in equity or debt crowdfunding you are investing in a security of the company. With equity you are receiving shares for your investment in hopes that the company will pay you a dividend on your shares out of the company’s profits, or you are expecting the company to grow to a point where you will eventually be able to sell your shares at a higher price then you paid for them.

In debt crowdfunding you are also investing in a security of the company (namely a debt instrument of some type) where your goal is to loan your money to the company with a fixed repayment term and the company pays you a specified interest rate during the term of the loan.

There are a variety of types of debt instruments that are available to investors. Some allow for conversion into common shares so that investors have the potential upside growth in the company while they receive steady interest payments, while others are straight interest yielding securities. There are secured and unsecured debt instruments. All of these factors plus the risk associated with the invest influence the interest rate and conversion rights (if any).

Debt crowdfunding is very attractive for those investors who desire a fixed return, making it easier for financial planning purposes. Traditionally debt investments that are secured against the company assets are seen as less risky and hence provide a lower interest rate yield than the unsecured instruments.

It should be noted that even though debt investments has are perceived to be lower risk, the portals will still be required to do the same level of due diligence as they would for equity type investments. They will also have to assess the company’s ability to meet the repayment schedule to the investors.

When you have a better understanding of the types of crowdfunding available then you can assess what investments help you meet your investment objectives. If you need help further assistance in assessing what type of investments best suit your particular circumstance it is best to contact a professional for advice.

Most companies go out to raise capital knowing exactly what they’ll do with the money once they have it. They’ve got an itemized plan broken down by category, and by months and years, but they forget about the source of that cash: Their new shareholders.

If your company is thinking of raising capital, your shareholder management game plan needs to be as well thought out as your marketing plan, your business plan, and every other part of your day to day operations, especially if you’re approaching equity crowdfunding.

Because in the world of equity crowdfunding, size matters.

The approval of Title III of the Jumpstart Our Business Startups (JOBS) Act is a milestone for the crowdfunding landscape and community, proving that bigger is definitely better — now everyone and anyone can become an investor.

This democratization of investment is incredible; people are financially empowered in a way they’ve never been before. Before Title III, a company could only have 500 investors before going public; now, companies may have up to 1,000.

This expansion of possibility is a wonderful thing, but if everyone is an investor, then companies raising capital under Title III are going to have to adapt to managing a larger number of shareholders, and will face a number of challenges associated with the influx.

If this influx of shareholders is going to cause a headache for your company, then why would you bother with such a number of shareholders in the first place?

This outlook is only relevant if you see your shareholders as bothersome, just another item on your list of things to manage. This is the wrong attitude; the truth is that your shareholders are your company’s biggest asset. Your shareholders are people who believe in you and what you do so much that they want to invest money in your ideas. It’s a relationship built on trust: they trust that they will see returns because your company has the drive and innovation to generate capital. With the ubiquitousness of social media, it’s especially important that your shareholders are satisfied with their relationship with your company, and not just whether or not they’re seeing returns.

So the question becomes: How do you make sure your shareholders are seeing results on all fronts? For one thing, shareholders should always have access to corporate information for the simple reason that they’re legally entitled to it. If it isn’t easily accessible, then that’s a problem with transparency and accessibility. Your shareholders care about you, and you should care about them.

A large part of succeeding here is ensuring that you’re always communicating with your shareholders. I spend a lot of time thinking about shareholder management – I built my company on the idea that managing and communicating with all your stakeholders should be done in one place, and that transparency should be a cornerstone of every business. The key is to adopt tools like KoreConX that bring together you and your shareholders. What will not work is Microsoft (MSFT) Excel, or the emailing tools of the past.

Having a plan in place and being proactive in managing your shareholders is essential when you’re raising capital. In fact, you’re doing yourself a huge disservice for future funding rounds if you don’t.

A large number of shareholders is a wonderful thing, and we’re prepared to work with them. It’s time to go big, or go home.

I’ve been in Shanghai and Hong Kong quite often over the last few months, speaking at events and meeting with partners. As a Canadian, what struck me most is scale. There is outstanding potential here, and that in itself isn’t at all surprising; but for alternative finance, the Asia-Pacific region has progressed at breakneck speed. The Asia-Pacific Alternative Finance Benchmarking Report gathered data from 17 countries that played this out.

A growing market

Asia is the largest single market in the world — China’s alternative finance market alone grew from USD $5.56 billion in 2013 to $101.7 billion in 2015. Calling this rise meteoric wouldn’t be overstating much, and it isn’t so surprising considering that China also has the world’s most connected population.

The report questions how best to nurture this growth to create a sustainable ecosystem and countries are opting for different approaches. Some create bespoke rules for online finance, while others apply existing regulations. The true socio-economic impact of online alternative finance is yet to be seen, but it’s clear that it is, and will continue to be, broadly felt.

Chinese alternative investors don’t rely on institutional lending to the same extent that other alternative finance marketplaces do. According to the report, alternative lenders and investors have acted quickly to fill the gap left by institutional investors by expanding the range of online financing services, leaving banks in the dust in fields like such as consumer credit, cars, education, and training, as well as Small and Medium-sized Enterprise (SME) financing.

Risks and mitigations

Despite the many marketplace and peer-to-peer lending platforms in China that operate by best practices and that have sound management capacities, the existence of fraudulent platforms highlight underlying challenges in the industry.

The primary risks to credit and investors associated with this finance model are associated with difficulties monitoring due diligence, underwriting, and credit risk control. In some cases, inexperienced teams, corruption, and fraud have resulted in platform collapses.

Notably, E’zu Bao, a peer-to-peer lending platform, recently collapsed after its executives were found to have embezzled $7.3 billion from over 900,000 investors in a short-lived Ponzi scheme.

Wangdaizhijia, the research partner of the report’s producers, recorded a number of “problem incidents” associated with the risks mentioned above. They recorded 92 such incidents in 2013, a number that rose to 367 in 2014. In 2015, the number of incidents stood at 1,263.

In response to these problems, the Chinese government enacted policy designed to foster the growth of Internet finance, as well as the development of platforms for lending, asset management, and insurance while at the same time implementing “moderately loose regulatory policies” as outlined in the People’s Bank of China Guiding Opinions on Promoting the Healthy Development of Internet Finance document.

These measures are intended to support private financing channels, opening up new platforms that can be standardized and regulated. The new policies mandate that all marketplace or peer-to-peer lending platforms must hold borrower and lender funds in a registered financial institution, and not with the alternative finance platform itself.

Lenders and borrowers then transfer funds via the institutionally-held account with a view to consolidating operating platforms. If it is ineffectively used, it may result in further barriers to entry for newly established platforms.

Future

While the growth of the alternative finance market in China is impressive, it represents a fraction of the total volume of Chinese bank lending. The report tells us that consumer lending by registered banks was approximately $3 trillion USD in 2015. This figure is 57 times greater than the $52.4 billion number reported by marketplace/peer-to-peer consumer lenders.

I’ve spent a lot of time in the past talking about the US equity crowdfunding landscape, the regulations, trends, and issues that it faces, but when I travel, I’m astounded by how much of a change I see globally. Nothing exists in a vacuum and markets across the world are all marching forward. The problems and growing pains experienced by one have a ripple effect in others, and limiting the discussion by borders is unnecessary.

FinTech is about to get an upgrade. In 2016, get ready to see GermTech – the entry and infectious spread of high potential German technological financing companies. With investments nearly quadrupling since 2013, seed funding expected to grow well into 2016, and a well-defined main hub (Berlin, Rhein-Main-Neckar region, and Munich), Germany is poised to become a dynamic European cluster matching the networks of United Kingdom and the flexible, progressive regulatory regime of the United States.

Recently, I attended an event where I sat on a panel with Jamal El Mallouk, from WhiteDesk, and Karsten Wenzlaff, CEO of German Equity Crowdfunding Association, to discuss this bubbling environment. Rather than pop, we agreed that German FinTech approaches are going to envelop the world.

This is especially true in equity crowdfunding, which saw the establishment of 150 portals and approximately $70 million raised. Local placements in Berlin, Rhein-Main-Necker region and Munich have seen flourishing raises. These advances have been particularly apparent in the Rhein-Main-Necker region, which has some key leverages, such as proximity to the rest of Europe, incredible institutions, and a supportive relationship with investors.

Of course, some barriers have been noted. There’s been lag between national policies, as compared to regional ones. An example is Germany’s Retail Investor Protection Act (Kleinanlegerschutzgesetz) enforced in July 2015. It saw crowdfunding exceptions typical of other countries, such as a threshold of EUR 2.5 million, investment caps per each shareholder, and licensing under appropriate regulatory bodies, such as German Securities Trading Act (Wertpapierhandelsgesetz).

Yet disrupters like Jörg Diehl, an active investor in Germany and who spoke on another panel, showcased the need for radical reinvention – in not necessarily trying to be the next United Kingdom in the FinTech industry, but the first Germany – the first GermTech.

KoreConX embodies this spirited push, the continual update and challenge of always doing better. Like Jorg emphasized and KoreConX has touted, all considerations are integrated – from investor to user, to the platform itself. All represent a total experience wherein the investors must be treated like ambassadors, the users like governors, and the platforms as the help that is needed before it is needed.

I personally look forward to the innovation that Germany brings, to the continual partnership alongside KoreConX, and the opportunities that await the GermTech pandemic (which, despite its name, is really quite a healthy, robust thing).

Get your mind out of the gutter!   Now, when you first saw the title, you asked yourself what business has to do with anything relating to double-Ds – of any kind.

We’re talking about Due Diligence.  Sexy, isn’t it? Due diligence is a topic that gets a lot of people talking and writing, but they don’t make it interesting. It loses its sex appeal.  The problem is that when these articles appear, most entrepreneurs turn their head and pay no attention or often comment back saying my lawyer does it all.  The future of their company depends on following due diligence best practices, and yet they’ve washed their hands of it.  They lose sight of the need to get naked for money.

ATTENTION,  ATTENTION.

This all changed on 28 October 2015 for companies, investors, and equity portals around the globe whether they know it or not. The SEC caught one American company committing fraud through equity crowdfunding, costing their shareholders almost $2 million in misspent funds, and it isn’t about to let them off easy.

We had our first fallout because no due diligence was done.  So what does this mean for companies, investors, portals, and anyone else that’s part of the ecosystem?  For one, it means that the level of scrutiny has to increase, for the good of the industry.   The fraud could have been detected had Ascenergy gone to an equity crowdfunding portal that was operated by a FINRA broker-dealer.  Instead, the fraud occurred through bulletin board style portals such as EquityNet and Crowdfunder.  These boards do no due diligence of their own, and all of the risk around picking a legitimate company with a real opportunity is shifted to the investor, and the responsibility to ensure that they’re staying compliant and transparent.

Equity portals will need to emphasize to investors the high level of rigorous due diligence they perform on companies before they’re listed on their platform regardless if you are doing Title II, Title III and Title IV.  They’ll need to reassure their investors that their companies can, to the best of anyone’s knowledge, be trusted, and educate them on the steps they take to vet opportunities.  Building trust will be critical for equity portals.  An investor that buys into a fraudulent deal on an equity crowdfunding portal isn’t very likely to do so again.

Each equity portal will employ different levels of due diligence, and may utilize third party companies to provide them with a FINRA compliant due diligence report which they can then combine with their own due diligence.  Portals such as Republic,  OfferBoard, StartEngine, BankRoll.Ventures, MicroVentures, CircleUP, and ASMX pride themselves on the rigorous due diligence they perform in companies.

For companies that thought that simply having a Power Point presentation and term sheet was going to be enough, all I can say is that you’re not going to be successful in having your company listed on equity portals.  Companies will need to make sure they fully understand all the due diligence requirements they need to meet.  Today, there are tools that help companies prepare their documents so they can share with equity portals to conduct due diligence. It helps them stay transparent with their shareholders, and effectively get naked in front of the crowd for money.

Title III in now live, and many entrepreneurs are wondering how rigorous due diligence will be on their companies.  They wonder if the process will be simplified, or if the requirements will change in any way.  The answer is simple: due diligence isn’t going away and the market will be crowded.  Portals will only take companies that meet and go beyond the basic due diligence requirements of Title III.

The due diligence requirements for Title II and Title III are very different.  Now, I caution all entrepreneurs, yes certain due diligence requirements are reduced under Title III, but equity crowdfunding portals operating under Title III can, at their discretion, decide not to accept you if they don’t feel you met their requirements.  My recommendation is to plan your due diligence as if you were doing a high-quality Title II raise, as you will need to stand out in the crowd.

It takes a pretty big leap of faith to hand over so much money to a company you’ve only just heard of, with a team you’ve never met, so portals and companies need to work in concert to create investor confidence. Due diligence is in place to protect the interests of the investor, and make no mistake that doing so is essential to ensuring the sector succeeds.  It’s an inextricable part of the marketing efforts of everyone involved.

I’ve written on this in the past, advising a paradigm shift in investor relations.  Now we’re doing the same for due diligence.  This is your chance to lay it all out there, to make your best argument for your company, your portal, and your future success, and create advocates out of strangers.

Like most of you today, I spend a lot of time reading about fintech. You can get massive amounts of news reports and companies talking about fintech, saying that they’re part of it. But what does “fintech” really mean?

Fintech is not new, but it has been given a facelift. Most would say that financial technology (or FinTech) has been around for a long time, and they’re correct. It isn’t new per se, but it is evolving faster now than ever, and changing how business is done. What makes fintech so disruptive that it’s affecting all the institutional pillars in one strike. The pillars (Banking, Capital Markets, Private Equity, Insurance, Legal, Regulatory), all of which are long standing institutional pillars in our business society that had been static – and stagnant– for too long.

Like many new sectors, in order to make sense of it and what it’s doing, you need to break it down into all the component parts to see how each affects what we’re doing or working on.

Fintech is a financial revolution, or as many call it, an EVOLUTION.

Fintech is for either B2C business to consumer financial disruptions which there are many changes occurring industry-wide that benefit the consumer. While most are at the banking level of disruption, insurance and regtech are not far behind.

Let’s take a minute to talk about B2B (Business to Business) fintech.  B2B Fintech is focusing on altering the institutional pillars that affect how a business uses them to acquire the services they offer or capital.

Fintech B2B disruption has a number of segments that are being disrupted simultaneously, causing issues for long-standing institutional pillars of banking, insurance, legal, and regulatory.

Let’s look at all the five segments of B2B Fintech

Alternative Finance (Altfi)

Capital raising was ripe for change the collapse of the financial markets in the USA and worldwide became the final straw that opened this market up. Today, we have alternative finance portals for debt or equity that help businesses access capital directly from individual investors, bypassing banks, venture capitalist, private equity groups, and the like.

Insurance (InsurTech)

This is one of the oldest established financial industries, and for decades companies involved in it have done little to innovate, and the market has stayed fairly stagnant. Today, we have a number of new players that have left those institutions to set up the new Fintech Insurance companies. They’re making change a reality, and at the end of it all, it’s the company that ultimately benefits. For decades, they paid the high cost of old institutional ways of operating and servicing their clients, but no longer.

Legal

Many in the legal sector say that you can’t disrupt the legal business. This statement is partly true, and false. Yes, it’s true we still need lawyers with the expertise to provide us advice in operating our companies. But technology is changing how lawyers work and deliver those services to clients. No longer does a business need to pay high costs to have documents created, or to create entities. Now don’t make the mistake of assuming that this replaces the lawyer, which it does not. The lawyers that embrace Fintech Legal understand their profession is going through a massive evolution, and that adapting means staying competitive, and driving value for their clients.

Banking

Of all the segments that felt the hit of Fintech, the one that was hit the hardest was probably banking. The banking sector in the early days of Fintech made the mistake of dismissing these early entrants as nothing more than fly by night. Now, looking back we know these “fly by nights” are now the norm. Banks are feeling the attack on all fronts, from consumers, business, wealth management, and every other subsector.

Regtech

This final segment is crucial for fintech B2B to become explosive. The underlying issue with all the segments in fintech is that the traditional pillars all rely on regulatory bodies to protect them. The global marketplace has regulated companies for years for licensing, capital raising, etc. Regtech is changing how we can open accounts with ID Verification, where money comes from with AML, how we validate companies,and conduct backgrounds checks, all in realtime and in a cost effective manner. There are many areas in regtech that are evolving, making it easier for businesses to reach their goals.

As you can see in the image, all five segments are changing because of one constant, the business. Bringing all the five segments together requires a platform that aligns itself with the businesses at heart of it all, one that can bring a company through all five processes in a seamless manner, allowing fintech to grow exponentially.

Standalone disruptions are not going to work if we don’t also include the the second “B” in B2B. To date, fintech companies involved in B2B have only enacted tech disruption from the institutional segment perspective, and put little efforts in solving the overall business problem.

These innovators are doing a great job, but as I said, for this to really explode on a global scale the second “B” must also be considered, and in fact, should be front of mind.

Let’s look at alternative finance in terms of equity crowdfunding or debt: each have a common goal to help companies access capital more efficient from the crowd. Equity Crowdfunding portals are in the business of bringing in companies, attracting investors, and performing due diligence, KYP, KYC, AML, ID Verification, Payments, and ensuring all closing docs are online.

Now what most don’t know is that before companies are listed, the portal’s professional compliance staff go to work. Their entire job is to review all the due diligence information provided by the company to the portal prior to being listed, and approve or decline. The amount of Information that the portals need is extensive, as they need to make sure there will be no issues with their securities regulators, that they’re working to prevent fraud, and also building credibility with their investor base.

Many feel that one day this requirement is going to be removed, and I can assure you it won’t be. The operators of the portals are either professionals from the investment sector, or from private equity, and they’re not going to take that risk themselves, or hurt their investor base. That base relies on them doing all the heavy lifting before the deal gets posted on their platform.

So now we see how portals are changing the way that businesses access capital, and what they need. It isn’t an easy process for the portals. It’s easy to see the ongoing issues portals are facing with on-boarding and post-transaction compliance related to the businesses they are helping.

Nobody had ever brought all five segments together in one place before KoreConX, allowing companies to access the full range of financial innovation in a cost-efficient manner until KoreConX.

KoreConX works with all 5 segments to create a seamlessly integrated ecosystem that can grow faster, reducing the friction in all five segments in B2B fintech.

The fintech sector is evolving rapidly, and the norm is no longer acceptable. For those in fintech, we have much work to do to truly and permanently alter current institutional pillars. They haven’t made any progress in B2B and are now scrambling and acquiring their way into the market. Players like Alphabet, Alibaba, and Microsoft are already making their presence felt, and many more are coming.

I’ve spent a lot of time in the UK lately, and it’s been on my mind even more. I was just there for the AltFi Europe Summit, and for the launch of The World’s First Fintech Book (I happen to be one of the authors), and while I learned plenty, what stick with me now wasn’t something I picked up in a summit or book launch. I think there’s something that we in North American alternative finance and equity crowdfunding fans could learn from UK alternative finance companies, and it’s regarding the degree to which alternative finance is becoming mainstream.

For those of you who have been to London. I hope you have taken the time to ride the “underground” subway system, it’s totally amazing. I do all my travelling in London on the tube, and one thing that really stuck out in my mind while waiting at the stations and on the tube itself the amount of advertising. It’s extensive in any major city’s transportation, but the advertising in the London tube holds a particular place in my fintech-obsessed heart, because of the place of equity and debt portals in daily mainstream advertising.

As I saw the ads on the tube, I would ask people: “do you know what that is?” and 10 out 10 people knew about equity crowdfunding and how it helps start-ups and companies access capital. This was surprising to me, partly because equity crowdfunding isn’t even the dominant sector of alternative finance in the UK, peer-to-peer lending is.

The two most notable brands I saw were Crowdcube and Seedrs. These two platforms clearly understand their role evangelizing equity crowdfunding and helping to grow the sector as a whole. They know that they need to get noticed, be seen and heard over and over again to be successful.

According to the 2015 UK Alternative Finance Industry Report, both the number of funders and fundraisers is increasing year over year. There is no doubt that as an alternative finance market and a market for equity crowdfunding, the UK is far more mature than the US, and competition exists to an extent that the US market has yet to see. Besides working to drive general market awareness, UK equity crowdfunding platforms are pursuing both public and private sector partnerships. They’ve seen increasing involvement from institutional investors, according to the report, but aren’t staying insular, they’re actively pursuing new funders and fundraiser.

By far the UK is much more advanced on adoption. If you’re wondering why, my observations are as follow:

Transparency

They truly practice it. They are visible. They provide market data. Equity crowdfunding portals in the UK are early adopters espousing transparency as a business fundamental. And it goes beyond that. The industry as a whole is testament to the value of transparency, the data it collects and publicizes relating the state of the market, including the successes and failures of the companies it’s helped fund.

Aggressively Seeking Out the Crowd

There’s no “wait and see” approach for UK equity crowdfunding portals and ecosystem members, or even an “if you build it, they will come” mentality. They’re seeking out the crowd, and doing it actively. My own company, KoreConX, recognized a long time ago that if we wanted to be successful as a company, then we needed to help grow the equity crowdfunding ecosystem by seeking a public audience and evangelizing entrepreneurs and potential investors.

The Brand of the Industry

UK-based equity crowdfunding portals understand the importance of stressing success. One of the well-understood industry-wide risks is a loss of investor trust, and counteracting this with stories of success, as well as pursuing rigorous due diligence practices helps safeguard the reputability of the sector as a whole.

The world needs to look at the UK model and how great its working so time is not wasted on re-inventing the wheel.

Crowdfunding is the CROWD. They need to see you the portal, lets not forget how it all works.

Happy Equity Crowdfunding.

You might not guess it looking at me, but I <a href=”https://www.equities.com/news/electronic-dance-music-las-vegas-and-its-unlikely-savior” target=”_blank” rel=”noopener nofollow”>love trance music</a>. I have been a big fan of trance all of my life, and it makes sense for me. It’s something that I just <em>get</em>. As I write this article I am listing to the state of trance sounds of Aly and Fila live from Buenos Aires, Argentina as one of their many global stops.

The sound is disruptive: it took everything established in music and turned it on its head. The original DJs of trance changed how performance worked, taking a part of the production process typically devalued, that happened in secluded studios and wasn’t considered as important and making it into a focal point.

I think the people that listen to this music tend to have the same personality type as the people that made it what it is: they’re disruptors. I may be somewhat biased being a fan myself, but hear me out. It’s true that trance has achieved a degree of mainstream acceptance and even prestige, but it began as a fringe genre for a very small group of listeners. Equity crowdfunding is much the same, and it gives me a sense of where we’re heading.

It had early advocates that birthed a new way of thinking and created a paradigm shift. <a href=”https://www.linkedin.com/in/sherwoodneiss” target=”_blank”>Sherwood Neiss</a>, <a href=”https://www.linkedin.com/in/jasonwbest” target=”_blank”>Jason Best</a>, <a href=”https://www.linkedin.com/in/douglas-ellenoff-588b682″ target=”_blank”>Douglas Ellenoff</a>and the other parents of the JOBS Act, as well as worldwide equity crowdfunding leaders like <a href=”https://www.assob.com.au/” target=”_blank” rel=”noopener nofollow”>ASSOB</a>, are the Tiesto’s, the Armin van Buren’s, and the Aly Fila’s of our equity crowdfunding world.

Just as the pioneers of trance took music and made it into a universal language, <a href=”https://bacuroma.kinsta.cloud/blog/en/blog/2016-world-domination-the-new-fintech/” target=”_blank” rel=”noopener nofollow”>alternative finance is truly universal</a>. It’s borderless, and largely divorced from politics, and religion. Any <a href=”https://www.equities.com/news/can-equity-crowdfunding-revolutionize-film-financing” target=”_blank” rel=”noopener nofollow”>viable legal industry has a place in crowdfunding</a>, including <a href=”https://baystreetcannabis.ca/” target=”_blank” rel=”noopener nofollow”>cannabis</a>. Regulations vary, but for the most part, investors and companies the world over are free to seek capital and to make investments the world over. Even economies are becoming global: alternative finance, and regulated crowdfunding in particular, has tied growth in one region to investment from another.

There is always common ground, and regulated crowdfunding and trance music alike take this principle to heart. Investing in growth and pursuing innovation is seen as a universal good that creates a better global footprint and the potential for worldwide wellbeing.

The stage is set for equity crowdfunding, and a grand performance is now underway. Companies are able to bypass incumbent sources of funding, expediting growth, and allowing companies that may not have been able to access VC or angel capital to enter the market, creating jobs, and brighter economic outlooks. The same disintermediation that happened in music when large record companies were shoved out of the way, allowing artists to access the consumer directly has brought companies, and new investors closer together than ever before.

The impact of social media allowed trance to quadruple its audience because it changed how information spread, and trance is universally understandable. The same thing is happening for capital raising as we speak. It’s about economic participation in an exchange traditionally limited to the privileged few deemed “sophisticated” enough to be smart with their money.

Trance and equity crowdfunding are two major leading disrupting trends that will change our lives forever for the better. Join the State of Crowdfunding with leaders like OurCrowd, OfferBoard, SyndicateRoom, StartEngine, CircleUp, Seedrs, Red Cloud Klondike Strike, SeedUps, Symbid, Bay Street Cannabis, Frontfundr, Realty Mogul, AgFunder, Prodigy Network, Bootra, Fundrise, NexusCrowd, AppVested, and ASSOB, and the list goes on and on. There is now an <a href=”https://www.equities.com/news/five-equity-crowdfunding-sites-that-are-blazing-a-new-trail” target=”_blank” rel=”noopener nofollow”>estimated 3000+ portals worldwide</a>; the state of crowdfunding is here and it’s borderless.

Now back to my state of trance live in Buenos Aires Argentina with Aly and Fila.

The tortoise may sometimes beat the rabbit, but in technology, it’s rarely much of a race. CB Insights CEO Anand Sanwal said <a href=”https://www.businessinsider.com/vc-analyst-claims-2016-will-be-the-year-of-the-rabbits-2016-1?r=UK&amp;IR=T” target=”_blank” rel=”nofollow noopener noreferrer”>just this</a>: that rabbits – real actual business building interesting tech – were needed for the 21st century. This means grounding a company’s’ operations. It implies avoiding the high evaluations where there is little substance besides excitement. And it requires overhauling trust and transparency in a way that is mutually beneficial for both shareholders and issuers.

<a href=”https://bacuroma.kinsta.cloud/all-in-one-koreconx/” target=”_blank” rel=”nofollow noopener noreferrer”>KoreConX</a> has been included in the R.A.B.B.I.T Report by <a href=”https://www.crowdcapitalvc.com/” target=”_blank” rel=”nofollow noopener noreferrer”>Crowd Capital Ventures</a> and <a href=”https://crowdfundcapitaladvisors.com/” target=”_blank” rel=”nofollow noopener noreferrer”>Crowdfund Capital Advisors</a> founded by Jason Best and Sherwood Neiss, two people who helped paved the way for the JOBS Act and equity crowdfunding in the US, as a holistic technological solution that epitomizes user-centered thinking. As leaders in due diligence, the potential in building technology with wide applicability, and an unwavering principle of reciprocity and excellence for all customers and clients, KoreConX magnetizes relationships in equity crowdfunding.

At the core is connection. KoreConX enables shared information, easy access to crowdfunding portals, and a way to streamline all shareholder management and <a href=”https://bacuroma.kinsta.cloud/all-in-one-koreconx/” target=”_blank” rel=”nofollow noopener noreferrer”>communication and documentation</a>. It’s a pulse to the crowd, to the initiative, and to the pre- and post-raise of equity crowdfunding. It’s also a mechanism to build trust and relations, soon to be the heart.

KoreConX’s inclusion in the R.A.B.B.I.T Report is testament to this ground-breaking work, indicative of both the growth of the equity crowdfunding systems <a href=”https://www.freedman-chicago.com/ec4i/Growth-of-Equity-Crowdfunding.pdf” target=”_blank” rel=”nofollow noopener noreferrer”>generally around the world</a> and need for customer-centric tools. It offers a solution to both private and public capital markets where there is a problem of accountability and an absence of robust channels of communication.

KoreConX simplifies all necessarily cohesive equity crowdfunding processes while maintaining the <a href=”https://bacuroma.kinsta.cloud/all-in-one-koreconx/” target=”_blank” rel=”nofollow noopener noreferrer”>integrity of the deal flow</a> and confidentiality of the information provided. Such intensive integration and understanding of the equity crowdfunding process mitigates administrative burdens, frees up time, and settles a company in for the race that requires both parts tortoise tenacity and rabbit rousing.

The R.A.B.B.I.T stresses that it isn’t only the race that matters, though – it’s the audience. KoreConX embodies the power in the crowd, showing that leveraging their excitement, by building their trust, and by consequently enabling them to wish to participate in the process, a business can be, and often is, bettered.

Read the full report<a href=”https://us2.campaign-archive2.com/?u=b0816e69963124d68737fcc2b&amp;id=30e289f691&amp;e=22c43ccbe1#_ftnref1″ target=”_blank” rel=”nofollow noopener noreferrer”> here</a>.

Banking, finance, and insurance have been largely constant and unchanging for decades. It’s been the very definition of an “old boys’ club”, static, institution, monopolistic, and powerful. Competition hasn’t come from within, at least not to the same extent that it once did, with monster banks working hard to simply take chunks out of each other. Fintech is slowly taking over entire business segments, and mobilizing a new demographic that is anything but old.

For those who are totally opposed to the Fintech sector, this will really frighten you.

Change is scary, but necessary. Technology has stepped in and created innovation from stagnation, and pivoted an entire industry full of players too top-heavy and cautious to even move. Suddenly, banks have no choice but to re-think their long-term strategy in order to continue to compete against more agile financial tech solutions that have seeped into the market and somehow managed to gain traction against market oligopolies in some cases, and huge financial resources in most.

Fintech is scary enough for many people, especially when considering how disruptive this sector has been. Fintech has already disrupted banking, proving the model was broken, second, it has disrupted capital markets by democratizing how capital can be raised and invested, and third, it’s beginning to change how the insurance business works. It used technology and cultural shifts towards regulatory changes to allow everyday non-accredited investors to invest. Equity Crowdfunding empowered people to potentially become a part of big change, taking something previously the purview of venture capitalists, angel investors, and the wealth, and making it accessible. Entrepreneurs benefit from easier access to capital, and investors from more options.

What all this shows is that we are in the midst of a fintech revolution, and there’s no way to stop it. Clinging to old ways of doing things, insisting that they were somehow better because they were familiar implies that there is room for fear in finance and in business. Fintech is a positive. Investors, consumers, and indeed even the banks should know that this is cause for optimism, because it represents an opportunity to be better, to do better, and to do more.

What this means is that new entrants that are disrupting these sectors are becoming global dominant companies overnight, something we have not seen in the past. Consider some of the equity crowdfunding success stories in the US and internationally: OurCrowd has successfully closed deals for companies looking for upwards of $25M in funding and StartEngine has more than $70M in reservations, and these stories aren’t even a scratch on the surface.

It takes very forward thinking investors to see this and many are getting on the list. It isn’t the investors that hold back, saying that new forms of finance like equity crowdfunding won’t work, it’s the established industry players, and they do it because they’re afraid. They refuse to adapt. They see the change, and that 2016 is the year that fintech companies step into the limelight, and begin to become household dominant worldwide. They are not used to this kind of competitor. They’ve only ever competed against organizations exactly like their own, and that scares them.

Brace yourself, for those that believe this is only happening in your city or country: the disruption is global and fintech is a tidal wave.

Travelling around the world gives you great perspective on many things.  From the people, culture, food, and market, to how everyone has their own way of getting things done. I spent the tail end of 2015 in airports and on airplanes travelling around the world to speak at conferences, and it has fundamentally changed my perspective on many things.

I had a system when I was travelling.  Each time that I was called on to speak in a new country, I’d begin by studying local securities regulations – how they work, what you can and can’t do, and what the limitations of each set of rules is. I was speaking as an expert in equity crowdfunding, but also taking it as an opportunity to become a student of the countries I was speaking in.  I wanted to bring a truly global perspective home, and bring international insights back to North America on what regulated crowdfunding looks like around the world.

Regulated Crowdfunding is a global phenomenon, everyone is curious as to what other countries are doing to grow it and control it.  It’s only natural. Very few technological innovations are “born global” but this is one.  Equity and debt crowdfunding have spread like an epidemic.

Today there are thousands of regulated crowdfunding portals on every continent. Capital markets have changed more in the past ten years than in the one hundred years preceding, and the impact of this change is exponential.

Currently, many countries still only allow accredited investors to invest in private companies via the regulated crowdfunding portals.  The accredited investor exemption is great because there are no limits for the company or the investors, but this is still constraining the pool of potential investors to a fraction of what it is in countries that have opened things up and empowered the crowd.

We also have countries that allow non-accredited investors to invest, but the regulators limits how much can be invested and how much companies can raise. Clearly this is not what the visionaries and originators of crowdfunding had envisioned, but we must understand that you have to crawl before you can walk, and walk before you can run.

So it’s obvious the Holy Grail in Regulated Crowdfunding is allowing a company to raise unlimited capital, non-accredited investors to invest and low regulatory reporting requirements.

Nowhere in the world does this exist except in one country: Canada.

Canada is the only country at the moment that has the Holy Grail of Regulated Crowdfunding.  It allows Canadian and foreign companies to raise unlimited capital from Canadian and foreign non-accredited investors. Canada has had the best piece of regulated crowdfunding regulation in place long before regulated crowdfunding even existed.

The rest of the world needs to see this model and learn from it. They should see how it works, and see how they can adopt similar measures in their jurisdictions.  Canada has done a great job with this exemption, termed the Offering Memorandum, and it needs to be appreciated for all it can do.  For those that want to increase their limits for both companies and investors look no further come and speak to the Canadian regulators.

The Holy Grail is here.