Nominee vs. Direct: How does this affect investors?

Today, there are many ways to buy and sell securities. For publicly traded companies, 75% of Americans are familiar with investing apps or online accounts. For private companies, many investors in companies invest with a broker-dealer and or maintain their own investments. In the first situation, an investor deals with a broker-dealer who holds the investors’ assets in a nominee account, while the second is a direct investing method controlled entirely by the investor. Both accomplish the same goal, buying or selling securities for profit or dividends, but the effect on an investor varies. 


A nominee is an account held by a broker-dealer, and securities owned by an investor are held as a means of separation between the broker’s business and the assets owned by the nominee account. This separation established a level of protection for the investor. In the event of the broker’s business failing, the securities held in the nominee account cannot be ascertained by any creditor claiming assets. The stocks will still be the asset of the investor, regardless of what happens to the broker. 


The issue that comes forth in this model is that, while regulators and exchanges review these accounts periodically, they do not get checked daily, which opens the door for a bad actor to commit fraud and move the assets without permission. For example, fraud could occur if the broker-dealer ‘borrows’ a client’s assets to keep them afloat, potentially. An even more extreme example would be if a broker was to take all of the money and run, though this is less likely. 


The main thing to consider is that while the investor is the beneficiary of the stock, the broker has the authority to move it and sell it on the investor’s behalf. This is why it is important to look into the investor compensation programs with a broker, and for further protection, separate your assets between multiple brokers. While this option comes with risks, the broker will ultimately handle the operations of the account. If you are working through direct investing, account operations are maintained by the investor. 


With direct investments, the trade-off for increased security is that an investor is responsible for buying and selling decisions. A direct stock plan can allow you to buy or sell stock in some companies directly through them without using a broker. However, according to, “Direct stock plans usually will not allow you to buy or sell shares at a specific market price or at a specific time. Instead, the company will buy or sell shares for the plan at set times — such as daily, weekly, or monthly — and at an average market price.” Both options have merit, but the choice is between complete security at the cost of time and energy. 

What are Options?

Like warrants, options are a form of security called a derivative. As a derivative’s name suggests, these securities gain their value from an underlying asset. In the case of options, this is the underlying security


There are typically two primary forms of options; call options and put options. Both are governed by contracts; a call option allows the holder to buy securities at a set price while a put option allows them to sell. However, options contracts do not come for free. They can be bought for a premium, which is a non-refundable payment due upfront. Once options have been purchased, the holder has a certain amount of time during which they can exercise their options. On the other hand, options do not require the holder to purchase the shares contracts allow. When options are exercised, the price paid is referred to as the strike price.


In buying call options, the holder is guaranteed to buy securities at a certain price, even if the underlying security significantly increases in price. A put option works more like an insurance policy, protecting the holder’s portfolio from potential downturns. If a security was to decrease in price, the shareholder would be able to sell at a set price specified by their option contract, even if the market price was to fall lower than what the option allows it to be sold at.


In addition to being a way to minimize investment risks and maximize profits, options are becoming a popular incentive for employees, especially in startup companies when looking to attract employees. In addition to options that can be bought, options also refer to the ones issued to employees by their employer. This gives employees the chance, but not the obligation, to buy shares within a specified time. Employee stock options either come as an Incentive Stock Option or Nonqualified Stock Options, with the difference being the tax incentives that go along with exercising the options. 


Whether you have call or put options, they are a useful way to protect your portfolio from downsides or benefit from being able to purchase more shares at a discounted price. They are just one of the many forms of securities available, which should be considered carefully when making investment decisions.

Equity Crowdfunding Platforms (RegCF)

As of 02 JUNE 2020, there are 51 active RegCF Equity Crowdfunding Platforms helping companies raise up to $1.0M USD.

We are all anticipating that RegCF is going to be potentially increased to a $5 million funding cap.   The SEC has proposed this increase, along with some other changes, and many observers expect the Commission to move forward with a higher funding cap.    

We recently did a Q&A with  Wefunder on what RegCF companies require.

We have compiled the list of 51 Active Equity Crowdfunding Platforms along with the sectors they serve.

Company Name URL City State Sector
Bioverge Portal, LLC San Francisco CA Healthcare
Buy the Block Denver CO Community
CollectiveSun, LLC San Diego CA Social Ventures
Crowd Ignition New York NY General
CrowdsourcedFunded Chicago IL General
EnergyFunders Marketplace Houston TX Energy
EnrichHER Funding, LLC Atlanta GA Loans
Equifund Crowd Funding Portal Inc. Kanata ON General
EquityDoor, LLC Austin TX Real Estate
Flair Portal ( Flair Exchange) Vancouver BC Gaming
Flashfunders Funding Portal Sherman Oaks CA General
Funders USA Newport Beach CA Technology
Fundit Fairfield NJ General, Inc. Murray UT Technology
Fundopolis Portal LLC Boston MA General
GrowthFountain Capital New York NY General
Honeycomb Portal Pittsburgh PA General
Hycrowd Jersey City NJ General
Indie Crowd Funder Los Angeles CA Film
Infrashares Inc. San Francisco CA Infrastructure
IPO Wallet LLC Sachese TX General
Jumpstart Micro Bedford MA General
Ksdaq Monterey Park CA General
MainVest, Inc. Newburyport MA General
Merging Traffic Portal llc Orlando FL General
MinnowCFunding Pasadena CA Real Estate
MiTec, PBC (Crowdfund Main Street) Fremont CA Impact
NetCapital Funding Portal Lewes DE General
NSSC Funding Portal (SmallChange) Pittsburgh PA Real Estate
OpenDeal (Republic) New York NY General
Pitch Venture Group LLC Houston TX General
Raise Green, Inc. Somerville MA Impact
Razitall Basking Ridge NJ General
SeriesOne Miami FL General
SI Portal (SeedInvest) New York NY General
Silicon Prairie Holdings, Inc. St. Paul MN General
SMBX San Francisco CA Bonds
Sprowtt Crowdfunding, Inc. Tampa FL General
StartEngine Capital Los Angeles LA General
STL Critical Technologies JV I, LLC (nvested) St. Louis MO General
Title3Funds Laguna Beach CA General
Chicago IL General
VedasLabs Inc. New York City NY General
Vid Angel Studios (VAS Portal LLC) Provo UT Film
Wefunder Portal San Francisco CA General
Wunderfund Cincinnati OH General
WWF Funding Portal LLC Detroit MI Water

If you have any questions about how we can help you with your RegCF contact us