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How to Build an Effective Compliance System

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.

  1. 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.

  1. 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.

  1. 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.

How should I manage my shareholders?

Just raised money via crowdfunding? Have you raised money traditionally several times and have lots of shareholders to manage? So, what is the best way to manage all your shareholders?

Managing one’s shareholders via equity crowdfunding is something that gets raised a lot. It is a hot topic because now companies are finding they have shareholder bases of well over 50 shareholders and find this burdensome. This can also be the case if you have raised money outside of crowdfunding also. Are your shareholders a burden? If you answered yes, then there is a problem. Shareholders are and should be your biggest advocates. They believe so much in what you are doing they invested their money in your business. There are fewer bigger advocates then those willing to stick their necks out with the founders and help your business grow. See Oscar Jofre’s article on making shareholders your business champions….

The quickest way to turn a shareholder into a burden is by avoiding them. Keeping them in the dark, failing to communicate, and waiting for them to harass you for an update turns them from champion to burden. Remember that the customer that has a bad experience is 10 times more vocal than the happy customer, well the same applies to shareholders. We believe that frequent updates and transparency on how your business is doing is the best approach to keep the engine running smoothly and the engage your shareholders.

But my business isn’t going as well as I had planned and I’m afraid to tell my shareholders. If this is your concern, it is a common one. However, by not telling them you are failing to give them a chance to help you. Your shareholders bought into your business because they like it. Some of them may have run businesses themselves and may have valuable input or advice for you. Proper engagement will bring you advice and the possibility of more financing if the well has run dry. In my experiences, shareholders can be understanding and helpful even if you give them the opportunity.

To manage the shareholders in an optimal manner requires firstly that the entrepreneur knows his investors. Knowing the investors or shareholders goes far beyond just sending them updates or asking for more money. It involves building a professional relationship where the worries and struggles of the company are shared by all and not by one.

The entrepreneur also needs to regularly e-mail about the progress of the company so that trust, transparency and openness within the boundaries of the company are norms that are expected of everyone. Having a proactive attitude and taking the initiative to sharing new updates regarding internal accounting and auditing, financial information, product and manufacturing, research and development, marketing strategies and sales forecasts should happen regularly.

The entrepreneur should also reach out to collect shareholder feedback via polls and personal communication in a way that makes shareholders feel as though their views are really being taken into consideration. Obtaining feedback and keeping abreast of shareholders in a personal way can significantly affect their willingness to support you when the going gets tough, and makes for a better experience for everyone!

Hopefully you now agree that keeping your shareholders engaged is important. Now, what is the best way of doing that? There are many tools to help and I bet many people started with an excel list and outlook, maybe even progressing to mailchimp or some other mail program. While this is a common approach it is rot with inefficiencies and risk. What if a shareholder moves or changes their contact details? Did you know email is NOT secure and that once you send it from your server it becomes in the public domain? Are you comfortable with your private information being publicly available? How are you tracking their engagement?

There is one tool that can help you do all of this and much more. At KoreConX all-in-one free platform have been building tools to help small and medium sized businesses operate more efficiently and save money in the process. For instance, did you know that our free version allows you to: Manage your boardroom activities, manage your Cap Table, manage your due diligence processes using our deal room, provide portfolio management to your shareholders, and much much more. Check out www.koreconx.com to learn more.

By providing portfolio management to your shareholders for free in KoreConX you are allowing them to stay connected with you at all times within a secure environment. When they move or change any of their contact details in the system that information automatically updates your records so you are always up to date. Our Investor Relations module allows you to communicate and engage directly through the platform and track the results. It offers a variety of other features to manage meetings, perform and tally evotes for shareholder meetings, perform outreach to potential investors, etc. This is the true way of optimizing your shareholder value.

All Hands On Deck

All too often, the responsibility of a company raising capital is left in the hands of a few people…and that weighs on them, affecting everyone. The majority of the team is left out of the process, carrying on day to day operations without input into where the company is going, and how it’ll get there.

Prior to the advent and adoption of equity crowdfunding, some companies going through capital raises would hire a professional to do it for them as they are busy running the company. But what if you are not a Fortune 500 company, but one of the remaining 130 million private companies that may not have the means to hire a professional?

With the emergence of regulated (equity, debt, flow through, royalty) crowdfunding, it’s not possible to use the same methods as before. Every member of your team needs to be involved, informed, and ready to go to bat for the company, and they need to do so actively, with humor and grace.

This means that every member of the team need to be informed on what is happening and actively engaged, while also supporting the company through their own social media presence. Potential investors want to hear directly from the company and the team, not a stranger. They want to feel connected.

Regulated crowdfunding has transformed an entire industry. Other traditional models of raising funds no longer work for 99% of companies around the world. Now you must apply the principle of “all hands on deck,” which means you are not alone. You CAN’T go through the process alone, you need to have a crowd – yes, your “inner crowd”.

Accessing your Inner Crowd

The inner crowd is everyone in your company management, board of directors, advisors, employees, advisors, partners, customers, lawyers, auditors, vendors: notice how large your inner crowd is and how many people and companies your capital raise affects? Does it make sense that they get involved? YES!

The new era of capital raising is called crowdfunding (not solofunding), and transparency means visibility.

Everyone must get involved right from the beginning, and if they are not ready to support, find those that will, and move forward…because the traditional way of capital raising is gone. Your team needs to know what you’re planning to do, and how you’re planning to do it…and they need to be empowered with the skills to create and maintain an active online presence.

Every CEO has the ability to sell their vision and goal to others, inspiring others to follow. This is no different. It’s now transparent so everyone can see that YES, they support you.

Dentons is a great example of a company being involved in every aspect while standing by their word to help companies. They not only supply legal services, but also reach out to their clients to bring introductions via social media.

This is the new paradigm that we are a part of. We all stand to benefit one way or another from a company successfully raising money. People can ‘vote with their money,’ and companies can leverage the power of the crowd to attract their best customers and biggest advocates: their shareholders.

Now get your inner crowd ready for regulated crowdfunding.

Three Compliance Commandments to Obey

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.

Entrepreneurs Get Naked for Money

I think you should get naked.

There’s a reason why people have nightmares about being naked in front of a crowd, and it’s because they hate the idea of being that vulnerable.  As an entrepreneur, it can be even more daunting.  Your success or failure depends on what that crowd decides, and you’ve likely been through a pitch or two, and maybe some of them unsuccessful.  So when it is your turn to do so again, it’s tempting to feel defensive.

But you have to get naked for money.  
I’m not being literal when I say this, naturally. I mean that if you want buy-in from a crowd of investors, then you need to go out of your way to be transparent with them.  Transparency is paramount.  There are two reasons to do this.

Reason Number One: People are Buying YOU
I’m speaking as a fellow entrepreneur.  What’s essential to keep in mind, here, is that you aren’t pitching, you’re marketing. And at the core of your strategy is putting yourself out there, fully and transparently, in order to pass the strict requirements equity crowdfunding portals put in place to make sure you’re fit for their equity portal.

If you’re pitching venture capitalists, chances are that you can assume some basic understanding of your company or industry.  You need to show that you’ve done your homework, but you don’t necessarily need to explain it all.  You’re  speaking to an informed audience that means their risk in taking your company on is diversified.

With equity crowdfunding, you’re starting from scratch.  Your potential investor may or may not know your company, may or may not know your industry, and may or may not have faith.  They aren’t investing simply on the merit or potential of your idea, they’re buying YOU.  That means complete and exhaustive visibility because these investors are a different kind of savvy.  They’re digitally so.  You need to proactively share everything about yourself and your company, and make sure your messaging and exposure is managed.  If these new investors find nothing on your company and are given no information, alarm bells will ring, and you’ll fail.  For more information on how this plays out as a marketing strategy.

Reason Number Two: You Are Not A Beautiful and Unique Snowflake.
The rules that govern every company, public or private, apply to you, casual and cool company culture aside.  Coca-Cola, Wal-Mart, Salesforce, Alibaba and Facebook are held accountable for their compliance and need to be aware of the regulatory environments they’re operating in, and you’re no different.

In business, silence may be cause for suspicion.  In this case, transparency is a strength, and by far the best way to protect yourself, to make your funding round successful, and to stay compliant with the SEC.  A few weeks back, the SEC announced the first equity crowdfunding fraud case. While the story is still playing out, penalties are likely to be stiff, and damaging to the reputations of all involved. So it’s clear that proactively playing by the rules is paramount, and yet people so idolize new companies and innovation, that they forget the old rules still apply.  We learned a lot from this fraud case that could have been prevented.

For startups companies, wrapping their collective heads around the fact that by definition, the company will not always be that is difficult.  You can’t stay a startup and be successful, so I say start acting like you’re bigger than you are.

Lumbering behemoths listed on most public exchanges are used to acting compliant, and most have been managing thousands of shareholders for years, some for decades, so they’re both well-versed in keeping them happy, and fairly resistant to bumps along the way.  I think optimism is in order – start acting like you’re publicly-traded now, and you’re much more likely to get there.

If you’re looking for funding to help your company thrive, you need to lay it all on the table.  If your idea is as great as you think and you stand in front of the crowd, naked, and show them who you are, they’ll give credit where credit’s due.

Get ready to be naked so you can take advantage of Title II or Title III equity crowdfunding. Enjoy being naked !!! It’s here to last.

Be Ready ! Tool to help you as an Entrepreneur be prepared !

https://koreconx.com/user_signups/new_signup

Becoming an EMD

So, you’re thinking of setting up your own Exempt Market Dealer “EMD”. Starting your own firm, along with the additional compliance responsibilities, can be daunting, but being your own boss can be rewarding.

Since NI 31-103 was enacted in 2009, regulators have imposed more obligations on EMD registrants: audit, insurance, proficiency, and now Chief Compliance Officer experience requirements. It’s important to vet the details before you file the application, since incompleteness can result in delays and, possibly, extra fees.

First, you need to incorporate an entity, open a bank account, and fund it with at least $55,000 to cover the minimum capital requirements and the insurance deductible. Then get in touch with an auditor, since regulators also require audited statements attesting to your financial health.

Next up: obtain necessary insurance coverage. This is a basic requirement that protects against fraud, theft and other losses. Errors and omissions insurance may be obtained separately, but is not specifically required. While waiting for word from the insurers, an application form to join the National Registration Database (NRD) can be submitted and provincial commission applications can be prepared. Once these two steps are complete, you can file the application with your principal regulator.

Registering to be an EMD used to be simpler, but now regulators are asking more questions to ensure principals are suitable.

Over the last couple of years, regulators have found recurring problems with EMDs selling products to non-accredited investors, inadequate suitability assessments coupled with incomplete client documentation, and a lack of due diligence on the products being promoted by representatives. As a result, regulators are trying to weed out unsuitable applicants before granting registration. Applicants who have little prior securities experience, no understanding about the role of compliance, and vague notions about the proposed activities of the registrant will set off alarm bells.

THE APPLICATION PROCESS

There are two main parts to the application process: the firm application and the registration of key people at the firm.

Regulators will want to know what the firm’s future activities will be, what type of products will be offered, and that the firm has proper policies and procedures in place.

The regulators usually take about a month to review the application and follow up with questions. And they always have questions, because no application is complete in their eyes. These aren’t necessarily as a result of problems that the regulators have found, but usually are them wanting to understand more about the firm and its individuals.

The most common issues raised by the regulators involve incomplete information. They’ll focus on who the key personnel behind the firm are, and will want to know the shareholders, directors, officers and dealing representatives. Each of these people must file their personal information online with the NRD, where commission staff will review it.

Further, the reviewer will look closely at what’s disclosed under the Current Employment section. You must include not only your employment with your sponsoring dealer, but also any outside business activities. Commission staff Google people, and if an activity is not disclosed, it can lead
to questions.

If you have a holding company, are on the board of a charity or even act as a coach in a youth organization, you’re considered to be conducting an outside business activity. The regulators’ view is that you can influence potential clients. So it’s better to over-disclose, rather than have them ask you to justify why you did not include an activity they feel should have been mentioned.

And, if you’ve had a bankruptcy or credit arrangement in the past, this must also be disclosed. Having had these problems does not mean they won’t register you; it is simply one factor they use to determine your suitability.

BUSINESS PLANS

The British Columbia, Alberta and Manitoba Securities Commissions require you to provide a business plan up front; the other commissions do not. You will need to have a clear idea about what you need the registration for, so have a good understanding of the products you want to distribute, as the commissions will ask about your proposed activities. This includes who your target market is, what exemptions you’ll be relying on and what types of due diligence you will perform.

To keep the application process moving along, respond to regulators’ follow-up questions within 48 hours so there’s no reason to delay your registration. If you meet the general requirements, there is no reason for commissions to deny your registration.

For more information on becoming an EMD

Jonathan Heymann
Director Compliance & Registration
KoreConX

jonathan@kinsta.cloud

Equity vs. Debt Crowdfunding

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: OfferBoardCircleUpOurCrowdASSOB.com.auAppVested, I-Bankers.com, CrowdCubeSymbidCrowdfunder.comEnergyFundersKlondikeStrike
  • 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.

Role for Corporate Secretaries in Companies with Equity Crowdfunding?

The Corporate Secretary’s role to date has only been utilized, appreciated and well understood by listed companies and larger private company enterprises. Rules mandate their extensive role in corporate governance.

Small & Medium Enterprises (SMEs) and start-ups however, have not seen the importance of this role in their business and have very little understanding on the value they bring.

Enter the meteoric rise of global #EquityCrowdFunding

The number of private companies seeking #equitycrowdfunding globally will grow to over the coming year to over 2 million. Legislation rising to govern #equitycrowdfunding will universally mandate that private and start-up companies use the need of corporate secretaries to keep minute books current, shares registered and other controls and procedures in place.

To date, private SMEs and start-ups have been restricted in their activities with very little governance or compliance responsibilities. However, if a private company or start-up wants to access #equitycrowdfunding they will need to follow new rules that regulators will put in place to protect investors including comprehensive transparency, governance and compliance requirements.

Private and start-up companies will remain private but with new regulations requirements, notably record keeping. Securities regulators have identified this area as critical. Gone are the days of managing your minute book, corporate records via a simple spread sheet in an email or drop box environment. New tools are needed.

KoreConX Enables the Corporate Secretary

KoreConX is a leader in providing a all-in-0ne business platform for FREE, helping private companies manage complex information assisting them with ever expanding governance and compliance requirements.

Importantly, KoreConX can help corporate secretaries manage corporate records, the capitalization table of private companies and more broadly shareholder expectations.

KoreConX is merely the tool, now we need to get corporate secretaries trained to provide this service to clients in Europe, Asia, South America, Middle East, Canada, Australia, and USA. To that end, KoreConX  is creating a global database of Corporate Secretaries who are seeking additional clients and have an interest in #equity crowdfunding.

If you are a Corporate Secretary or would like to become one click here to register on database and to receive a brief on how your role will expand in the age of #equitycrowdfunding.

https://bacuroma.kinsta.cloud/?whocanuse=corporate-secretary

What will happen to blockchain in 2017?

Banks are beginning to recognise the potential of blockchain. Oscar Jofre looks at what this could mean for financial services in 2017.

Blockchain is transformative. It has this massive potential to alter the economic framework, bringing it in line with the age of the internet. What’s been holding it back thus far has been the confusion as to what we’re actually talking about when we talk about blockchain and how it can be applied.

In the past 12 months, as I’ve attended events and meet-ups, I’ve noticed much of the discussion has centred around the tokens, currency and creating miners, and so on. I would argue that these conversations miss the point. Blockchain cannot be insular – its consequences are too far-reaching. We’re now just starting to have discussions on how the blockchain framework can be applied to numerous business sectors beyond banking, and change the way things are done for the better.

In order to understand what impact blockchain framework is going to have in 2017, we need to break the discussion down into a couple of buckets.

Banking

Banks around the globe are setting up sandboxes to test and see how blockchain can be implemented within their core business. While it’s tempting to assume that banks are slow-moving beasts at the tail end of the technological adoption curve, this isn’t really the case. They’re early adopters for blockchain testing at the very least, but of course it will take time for them to adapt.

While the sandboxes allow internal teams to work without distraction, they need to remove barriers so the teams can test and build the technology.

Many blockchain enthusiasts and companies are focused on being selected to work with banks, but I caution many that, in the end, banks will create their own internal expertise, since it’s the only way for them to be competitive in the marketplace.

Business

The real opportunity is in blockchain’s potential real-world impact on businesses outside of the financial and banking industries. There’s less regulation there, so it’s much easier to adopt.

Ask yourself this question: does it really matter to the end user that you’re using blockchain to store their information? Generally, the answer will be no. What they do care about is that you can provide them with access to an application that will never be tampered with. Now that’s a real business solution.

For blockchain framework to make a real impact globally, it needs to be adopted by application providers who provide software for business.

Companies are attempting to build applications using blockchain, but have no experience in it, a market trend that means for that reason alone, it’s more difficult to make blockchain work. There are countless blockchain-focused companies raising capital, presenting their solution or their tool to be much better from the front-end – that is, something users can see and benefit from, because it’s on blockchain. But the question needs to be asked, do they understand the entire processes that are needed for the proper implementation?

This comes down to the following: how are software programs created in North America, and how is it done in other places globally – for instance, Asia?

Changing public capital markets

Here’s a quick example: a program called WeChat is an all-in-one social media platform that’s very popular in Asia. Its capabilities are like Twitter, Facebook, Google+, Instagram, Skype, Google Wallet and Apple Pay, combined (to name just a few).

For blockchain to truly function properly, its builders need to fully comprehend the entire ecosystem. A great example of this is Blythe Masters and her company Digital Asset Holdings. They’re completely changing public capital markets, not just one piece of the market, but every cog in the public capital markets machine. For that, the company needed to make sure it had the sector expertise it needed to ensure on implementation its product would work, and the company has both Nasdaq and the Australian Stock Exchange in its corner to demonstrate that. No other blockchain provider has had this level of success.

In 2017, many of the blockchain companies that want to enter the business application sector will not survive beyond their concept stage. We’ll see more companies like Blythe Masters’ Digital Asset Holdings that do check all the boxes to succeed, of course. Blockchain in 2017 will have far-reaching impacts, with applications for insurance, real estate, mining, oil & gas, private companies, and many other sectors, including government, though this will take time. Governments will take the same approach as banks, so be ready for more sandboxes. In all of the upcoming blockchain companies, you will see teams with domain experience in each of the sectors they’re building on.

Growing up

What all this really means for blockchain is that it has grown up. Investors are already starting to see this effect. Here’s one example: A blockchain company with a great mobile app can move money from person to person much faster than the incumbents who provide this service. Millions get poured into the company, to later discover that …

  • Nobody asked how the money was going to get to their system.
  • How long that would take.
  • When the other party receives the funds.
  • Where can they get the money.

Clear examples of creating a facade, but with no practical knowledge of how the real world works or how it can be used. There are many others like this.

The real investment needs to be in companies who already have this established knowledge, domain expertise, and who can adopt the blockchain framework and see it work in the real world.

​Size Matters: How to Manage Shareholders Under Title III

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.

Perspective: Alternative Finance in Asia

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

China Coin MoneyWhile 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 and Equity Crowdfunding in Germany

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).

The Double-D (as in Due Diligence)

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,  OfferBoardStartEngineBankRoll.VenturesMicroVentures, 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.

Fintech: The New World Order

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.

The U.K.’s Mature Financial Disruption: What the Rest of Us Can Learn

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.

Trance Music and 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 R.A.B.B.I.T. Race: The Importance of The Crowd, and the R.A.B.B.I.T Report

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>.

World Domination: The New Fintech

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.

Holy Grail of Regulated Crowdfunding

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.

Its great to be Canadian eh !!

It’s an exciting time to be in Canada. On March 20, 2014, the Canadian regulators proposed 4 ways that companies can raise capital in Canada via equity crowdfunding, and more importantly 4 ways investors can invest. This is a great start!!!

There is no longer going to be the issue of a investment gap in Canada. With the 4 proposed regulations companies now have options to raise capital during each stage of their company’s development.

Canada is the only country in the world that allows 4 types of equity crowdfunding regulations. Canada might have been late getting in the game but they are coming out with a bang!

The info graphic illustrates the <strong>four (4) proposed equity crowdfunding</strong> regulations.

No other country in the world today, offers this many choices to investors, companies and equity portals for accessing capital.

<strong>Option 1</strong>, the accredited investor exemption is similar to the rules in the USA, and other countries around the world. This exemption applies all across Canada.

<strong>Option 2</strong> the Offering Memorandum (OM) is very unique exemption to Canada.. This allows companies to raise capital from non-accredited investors with a specified disclosure document and risk acknowledgement requirements.

<strong>Option 3</strong> the Equity Crowdfunding exemption allows companies to raise up to $1.5Million annually, and investors have limits on how much they can invest. This option is also limited to certain provinces in Canada.

<strong>Option 4</strong> the Start up exemption allows anyone within the provinces that are adopting this exemption to raise up to $150,000 every 6 months, and investors have limits on how much they can invest.

With all these choices, these are very exciting times for Canadians. It is important for anyone interested in Equity Crowdfunding to make sure they receive proper advice from their legal counsel, accountants and board of directors on the most effective equity crowdfunding strategy for your company to raise capital.

To learn more about what is happening in Canadian Equity Crowdfunding Sector, follow Equity Crowdfunding Alliance of Canada (ECFA Canada) https://www.ECFACanada.ca.

Don’t miss this opportunity to learn about equity crowdfunding. <strong>FREE eBook</strong> on Equity Crowdfunding to get you started.