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[Legal] SEC Approves Title III of JOBS Act
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Author Topic: [Legal] SEC Approves Title III of JOBS Act  (Read 1965 times)

Damelon

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[Legal] SEC Approves Title III of JOBS Act
« on: November 02, 2015, 12:59:37 pm »

There has been quite a bit of hubbub about this article the last days: http://www.forbes.com/sites/chancebarnett/2015/10/30/sec-approves-title-iii-of-jobs-act-equity-crowdfunding-with-non-accredited/

And rightly so, because the fact that the SEC is relaxing the rules for crowdfunding is good. It reflects a move towards a sharing economy that has been growing steadily now that the internet provides us with the tools to easily collect money for causes and startups.

However, this ruling does not mean that crypto platforms like NXT are now "legal".

Let's take a look at what the article actually says:

Quote
Title III Quick Summary

    Equity crowdfunding expands to include non-accredited investor participation
    The new rules will go into place after a 90 day commenting period and publishing
    Startups and small businesses can raise up to $1M in a period of a year
    Investors making <$100,000 per year can invest the greater of $2,000 or 5% of annual income
    Investors making >$100,000 per year can invest up to 10% of their annual income
    Offerings must be made via Broker-Dealer or Portal Intermediary
    Significant disclosures are required for companies to help provide transparency


I have bolded the parts in this summary that exclude Assets as they are done today.

BUT: the ruling does not mean NXT cannot be used at all!
Remember: NXT is a platform, not a company. The ruling does not specify which platform the money can be raised on, just the manner in which it is raised.
So if there are brokers that want to use crypto, this is still a very real option and one we'll see happening more and more, I think.

Let's move on a bit towards the other important parts, shall we?

Both brokers and companies still need to comply by some rules:

For companies:

Quote
Disclosure by Companies

Consistent with Title III of the JOBS Act, the proposed rules would require companies conducting a crowdfunding offering to file certain information with the SEC, provide it to investors and the relevant intermediary facilitating the crowdfunding offering, and make it available to potential investors.

In its offering documents, among the things the company would be required to disclose:

    Information about officers and directors as well as owners of 20 percent or more of the company.

    A description of the company’s business and the use of proceeds from the offering.

    The price to  the public of the securities being offered, the target offering amount, the deadline to reach the target offering amount, and whether the company will accept investments in excess of the target offering amount.

    Certain related-party transactions.

    A description of the financial condition of the company.

    Financial statements of the company that, depending on the amount offered and sold during a 12-month period, would have to be accompanied by a copy of the company’s tax returns or reviewed or audited by an independent public accountant or auditor.

This boils down to:

Who owns it?
Who runs it?
What are they planning to do?
How much does the share cost?
How financially healthy is the company?


Having seen a large amount of scams the last years, this can be boiled down even further to: "Who is this person who asks for money and is he trustworthy and can I check this?"

For the brokers the rules are generally in the same vein:

Quote
Crowdfunding Platforms

Title III equity crowdfunding transactions will be required to take place through an SEC-registered intermediary, either a broker-dealer or a funding portal. Under the proposed rules, the offerings would be conducted exclusively online through a platform operated by a registered broker or a funding portal, which is a new type of SEC registrant.

The proposed rules would require these intermediaries to:

    Provide investors with educational materials.

    Take measures to reduce the risk of fraud.

    Make available information about the issuer and the offering.

    Provide communication channels to permit discussions about offerings on the platform.

    Facilitate the offer and sale of crowdfunded securities.

The proposed rules would prohibit funding portals from:

    Offering investment advice or making recommendations.

    Soliciting purchases, sales or offers to buy securities offered or displayed on its website.

    Imposing certain restrictions on compensating people for solicitations.

    Holding, possessing, or handling investor funds or securities.

I'd boil them down to:

Say what you are offering
Make sure people can reach you with questions
Actually help people with problems relating to the sale
Don't hype or tell people what to do


Also, fairly straightforward.

So, as far as I am concerned, it's a step forward.
I realise some people like a total free market and see this as handholding.
The fact of the matter is: a lot of people need it, like it or not.
This may be because I come from Europe, where we have less of a culture for hating any kind of state interference.

Anyway, regardless of the opinion I personally hold, I hope this explains a bit about what the SEC action actually is about.

NXT is still an option, as this decision actually is platform agnostic. It's not about the platform, but about how crowdfunding is done, regardless of the facilitating platform.


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bcdev

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Re: [Legal] SEC Approves Title III of JOBS Act
« Reply #1 on: November 02, 2015, 01:52:03 pm »

Quote
Title III Quick Summary

    Equity crowdfunding expands to include non-accredited investor participation
    The new rules will go into place after a 90 day commenting period and publishing
    Startups and small businesses can raise up to $1M in a period of a year
    Investors making <$100,000 per year can invest the greater of $2,000 or 5% of annual income
    Investors making >$100,000 per year can invest up to 10% of their annual income

    Offerings must be made via Broker-Dealer or Portal Intermediary
    Significant disclosures are required for companies to help provide transparency
It's good that government protects you from investing too much into a business you believe in. [No, it's not good.]
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Damelon

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Re: [Legal] SEC Approves Title III of JOBS Act
« Reply #2 on: November 02, 2015, 02:04:58 pm »

Quote
Title III Quick Summary

    Equity crowdfunding expands to include non-accredited investor participation
    The new rules will go into place after a 90 day commenting period and publishing
    Startups and small businesses can raise up to $1M in a period of a year
    Investors making <$100,000 per year can invest the greater of $2,000 or 5% of annual income
    Investors making >$100,000 per year can invest up to 10% of their annual income

    Offerings must be made via Broker-Dealer or Portal Intermediary
    Significant disclosures are required for companies to help provide transparency
It's good that government protects you from investing too much into a business you believe in. [No, it's not good.]

If you have ever worked in debt relief, you'd see this in a different light, I think.

1. People who have bad financial management skills generally don't improve by themselves
2. People who have bad financial management skills generally fall for money raking schemes
3. When people get into severe debt, the government takes care of them: this costs money
4. Debt frequently, in such programs, are waived for a large part: this costs money

There is a case to be made for putting limits on people's ability to put themselves in severe debt.
There is also a case to be made to let sane people spend whatever they like.

However, the statistics bear out that many people are incapable of making sound investment decisions, after which they become an onus on society.

It's never just black/white "government bad - freedom good", I think.
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bcdev

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Re: [Legal] SEC Approves Title III of JOBS Act
« Reply #3 on: November 02, 2015, 02:27:50 pm »

You brought a good point. Majority of people don't know how to manage their money.
However, IMO investment limits won't help:
1) You already can buy a new car/house on a loan which will put you in debt for 5-30 years.
2) There are no limits on gambling. You can gamble your whole net worth in one night and no one will stop you.
3) Lots of people have tens, sometimes hundreds of $ of student loans.
4) You can already gamble your net worth away on Forex. I don't see crowdfunding investments as much different.

Overall, I think that this law:
1) Will stifle people who do know how to manage their money. [You&Me]
2) Will not help people who don't know how to manage their money. Such people are poor today, and will be poor in the future.

What would help IMO is real money&investment&critical_thinking [mrmoneymustache-like] education in schools. Unfortunately, that's not going to happen. Right now people who enter the workforce think "spend, spend, spend" since that's what's taught by schools&society [so called Americal Dream™].
« Last Edit: November 02, 2015, 02:39:03 pm by bcdev »
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Damelon

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Re: [Legal] SEC Approves Title III of JOBS Act
« Reply #4 on: November 02, 2015, 03:18:17 pm »

You brought a good point. Majority of people don't know how to manage their money.
However, IMO investment limits won't help:
1) You already can buy a new car/house on a loan which will put you in debt for 5-30 years.
2) There are no limits on gambling. You can gamble your whole net worth in one night and no one will stop you.
3) Lots of people have tens, sometimes hundreds of $ of student loans.
4) You can already gamble your net worth away on Forex. I don't see crowdfunding investments as much different.

Overall, I think that this law:
1) Will stifle people who do know how to manage their money. [You&Me]
2) Will not help people who don't know how to manage their money. Such people are poor today, and will be poor in the future.

What would help IMO is real money&investment&critical_thinking [mrmoneymustache-like] education in schools. Unfortunately, that's not going to happen. Right now people who enter the workforce think "spend, spend, spend" since that's what's taught by schools&society [so called Americal Dream™].

I completely agree that education should always be the first answer and is the most effective.
One of the problems of course is that educators themselves have also been badly educated.

I see it as a kind of disaster control, while fully acknowledging that the fact it's not implemented in other areas is two-faced.
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NxtSwe

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Re: [Legal] SEC Approves Title III of JOBS Act
« Reply #5 on: November 03, 2015, 02:44:09 pm »

Would it be possible to mix legal assets with illegal ones on the same platform (NXT)?
If so, it could be up to each issuer to decide what he/she wants to disclose.
Wanna make it 100% legal? Sure, just include this info: who owns it? who runs it? what are you offering? etc...
If you don't want to, you don't have to.

I'm all for a 100% free market, and being able to choose between the choices above would not restrict anyone.
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