Jared, I enjoyed your article and agree with most of the thoughtful analytic distinctions that you make and fully support your effort to sensitize the public to the evolving and varied business models of all JOBS Act related platforms. I am a partner in Ellenoff Grossman & Schole LLP, a securities law firm that worked closely with the platform community and the Federal and State regulators that established the rules around the JOBS Act statute. I also co-founded iDisclose, a legal technology company, that offers entrepreneurs an application to generate their own legal disclosure documents (required under Title III, a so-called Form C-- we also have a PPM application).
I would also highlight that both issuers (entrepreneurs) and investors ought to focus on the revenue models of the platform. Broker-dealer (and RIA) platforms typically take commissions on each dollar raised by an issuer, must perform regulatory required due diligence and their activities are monitored by the SEC or FINRA, as the case may be, and they are responsible for overseeing those platforms activities and compliance with the rules. Same holds true for Title III platforms which must by statute be approved by FINRA.
Certain Reg D platforms and Title II platforms generate revenue like a venture fund or real estate firm benefit only from the profits generated in excess of the original investment amount of the investors (a so-called profits participation). While I fully agree with your observation of the benefits to investors, along with the lead investors and syndication generally, it is important to also note that these platforms do not necessarily have to be licensed as broker-dealers consequently. Perfectly lawful in most cases.
These platforms consequently have different economic incentives and liability profiles.
We specifically developed iDisclose to drive down the cost of legal disclosure to be consistent with this new online ecosystem but maintain high quality disclosure through a TurboTax like process to reduce potential liability to the issuer and the platforms.
BTW, all of the platforms which you referenced should be acknowledged for their excellence and pioneering approach to this new online investment world.
Would love to answer any further questions you can find me here or @douglasellenoff
I would also highlight that both issuers (entrepreneurs) and investors ought to focus on the revenue models of the platform. Broker-dealer (and RIA) platforms typically take commissions on each dollar raised by an issuer, must perform regulatory required due diligence and their activities are monitored by the SEC or FINRA, as the case may be, and they are responsible for overseeing those platforms activities and compliance with the rules. Same holds true for Title III platforms which must by statute be approved by FINRA.
Certain Reg D platforms and Title II platforms generate revenue like a venture fund or real estate firm benefit only from the profits generated in excess of the original investment amount of the investors (a so-called profits participation). While I fully agree with your observation of the benefits to investors, along with the lead investors and syndication generally, it is important to also note that these platforms do not necessarily have to be licensed as broker-dealers consequently. Perfectly lawful in most cases.
These platforms consequently have different economic incentives and liability profiles.
We specifically developed iDisclose to drive down the cost of legal disclosure to be consistent with this new online ecosystem but maintain high quality disclosure through a TurboTax like process to reduce potential liability to the issuer and the platforms.
BTW, all of the platforms which you referenced should be acknowledged for their excellence and pioneering approach to this new online investment world.
Would love to answer any further questions you can find me here or @douglasellenoff