How to Manage Investment Information

For entrepreneurs, it’s crucial to understand the private capital market well. Companies no longer need to go public to raise capital, enabling entrepreneurs to maintain more control of their companies. With regulations such as RegA+ and RegCF, accredited and non-accredited investors can be part of capital raising. Plus, the available pool of capital is expected to reach up to $30 trillion by 2030, making it a promising resource for companies. At the same time, investment management has become even easier with online services and platforms coming that provide end-to-end management for private companies to streamline the process.


Understanding KYC and KYP


It is vital for investors and issuers alike to know who they are dealing with. This is where KYC (Know Your Customer) and KYP (Know Your Product) come into play. Before making any investment decisions or accepting an investment, you should always know the issuer or investor’s identity. 


KYC is an essential component of risk management. As an issuer, it can help you to understand who your investors are and determine whether they would be a risk to your company. KYC can be complicated but helps to protect against money laundering and fraud.


KYP is most applicable to broker-dealers and is all about understanding the investment products or services you are offering to your customers. This includes knowing something about the issuing company, and understanding the structure of investment products, eligibility requirements, and other information that can help a broker-dealer determine whether an investment opportunity is right for an investor.


Remain Compliant


Compliance is another crucial aspect to consider regarding private capital raising. The Securities and Exchange Commission (SEC) has enacted many rules and regulations to protect investors. These include the requirements for disclosure, registration, and filing. In addition, there are restrictions on who can invest and how much they can invest. All of these requirements are designed to protect investors and issuers from fraud.


It’s important to note that certain compliance issues must be considered when raising capital privately. For example, under RegA+, companies must file a Form 1-A with the SEC. This form provides information about the company, the offering, and the risks involved. In addition, companies must provide audited financial statements and disclose any material changes that have occurred since the last filing. Under RegCF, companies are required to file a Form C with the SEC, requiring similar information to that of Form 1-A. 


Compliance may seem like an inconvenient chore, but in fact, it offers issuers many benefits, including avoiding unnecessary costs and delays, understanding the shareholder base, identifying potential high-risk investors, and encouraging best practices in record-keeping generally. By taking a proactive and whole-hearted approach to compliance, issuers will not only have an easier time completing their raise, but lay a better foundation for more efficient and smoother operations going forward


When managing your investments and staying compliant with the law, it is important to have a solid grasp of KYC and KYP processes. KoreConX can help you with your compliance needs with our complete end-to-end solution for private companies and broker-dealers. Our platform includes a KYC/KYP tool and a compliance management system to help you efficiently and securely manage compliance activities.


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