Transcript for:
Insights on Private Capital Markets Evolution

Welcome, everyone. Once again, it's great to have everyone back to the Core Summit series, The Rise. Yes, it's an exciting title.

And for the next four days, we have some amazing thought leaders that have been pivotal in how the private capital markets have been growing and, of course, operating. And you're going to hear all about that in the next few days coming up. Obviously, we're very thankful for everyone attending today and, of course, to our sponsors.

Thank you. their support. This would not be possible.

As you know, education is extremely important and it requires everyone being involved. We want to thank RaceX, one of the leading quarterback firms, guiding companies using the Jobs Act regulations. CoreChain, the first and only SEC blockchain technology that has been qualified by the Jobs Act regulations.

Invetomy, an investor acquisition firm that uses art and science to bring it all together in order for greater success. And of course, GCN, Global Capital Network, are leading events bringing together both investors and companies together in a compliant way so everyone can flourish. So this Core Summit series is going to be exciting.

It's going to be hopefully educational for everyone to see what has been happening in the private capital markets. I know a few months ago, we published some data for everyone to give them a glimpse of what was going on. and it was an awakening i think a lot of people thought that the jobs act was only nibbling at it and as david wheel says we're penetrating it and it's only growing and with that growth opportunities and of course we can all learn from the pitfalls and all that things we need to improve and hopefully during this week this course summit web webinar series that is specifically for the intermediaries broker dealers the lawyers the auditors who are deep inside the trenches of this day-to-day, trying to navigate and keep everyone compliant.

Well, you know, we leverage technology, which sometimes comes at a price when it's done incorrectly. But overall, it's the success of the private capital markets that is keeping us here today. And after eight years, we're so honored to continue that journey and bring an education to everyone.

So our core summit series this time starts with the father of the JOBS Act, Mr. David Weill. He is going to begin the process of bringing that education to all of you. And who is he?

Well, for most of you, you may not know, he is the former vice chairman of NASDAQ. He is considered and has been coined the father of the JOBS Act by both houses in the United States. He is currently today the chairman and CEO of William Corp.

Wheel & Co., one of the fastest growing firms in the United States, according to Inc. 5000. And he is a global speaker. And without him, look, the reality is what the United States did has become a ripple effect around the world. And that's a positive indication of how powerful the Jobs Act can be. It's still not perfect, but the point is it got the ball rolling. So with that, I'd like to introduce you all to Mr. David Wheel.

who will be delivering our keynote this afternoon to get things started. David. Terrific.

Can everybody hear me? 100%. Okay, that's terrific.

Look, I think it's absolutely remarkable on some level when you go out and have an idea of some of the things that are worth. wrong with our markets. And, you know, your campaign took us three years effectively of educating people.

And it was a long time ago now, but it takes a long time for major changes in market structure to evolve and really to take hold. And because the United States is the is really the kind of the most developed capital market in the world and the one that the rest of the world likes to look to. If we get it right, they emulate us. And if we get it wrong, they emulate us.

And so getting it right takes on a really outsized responsibility. And we think that we we think we got it. We think we got it quite right with the Jobs Act, but we think it's only a part of what we.

uh need to be able to do to really kind of turbocharge the the us and the economy and the western democracy so i'm gonna run people if i can get it up uh through a um uh presentation And it's telling me to select the PDF. So I went in here and I did pull up or save this file as a PDF. It's going to take me a second, folks, so bear with me. I was originally expecting this to be done as a PowerPoint.

And here we go. Look at this. So terrific.

I'm going to start out. I think you got a little bit of it. I was the head of equity capital markets at a top 10 firm years ago. I priced 1,000 public equity offerings. I also ran investment banking at that firm.

And in the process, some of the notables, I raised money for Nvidia. I was a joint book running manager. Everybody knows that stock.

But BlackRock effectively ended business by raising the first capital. And actually, the name BlackRock is a name that I spitballed with, came up with, because originally it was called Blackstone Financial Management. It was being spun out of the Blackstone Group and they couldn't keep the name, according to Steve Schwarzman.

So Ralph Schlossstein, who later ran Evercore, and I came up with that name. Celgene, which got sold to Bristol-Myers Squibb for $74 billion. Polygram Records, which owns such labels as, for those of you that are old-timers, Deutsche Grammophon and Island Records. I was vice chairman of NASDAQ.

I founded Wielden Co., which is a decentralized investment bank that I currently run. And we've been the leading innovator in equity capital markets in general through shelf registrations at the market, offerings in public. markets registered directs uh and also as as uh as uh mr uh joffrey pointed out uh i've been given the title of father of the jobs act largely because i went out on a quasi-academic rant for three years and told people everything that we needed to do about our markets and they listened and that sort of they went out into their corners and the jobs act for those of you that don't know was actually uh an amalgamation of seven different bills. They call it an omnibus bill, which are typically very difficult to get done. Seven bills wrapped into one and includes everything from crowdfunding to generally solicited private placements, Regulation A+, all these different forms of financing.

And I'm particularly proud of it, not because that we got it done, but because of what it's doing for the... U.S. economy and the rest of the world. So why did we do it? And why did we push so hard? Because we needed to make it easier for entrepreneurs to raise equity capital in private markets and also to extend the runway in IPOs, which is important because we actually made public markets less functional when we went to electronic trading, for reasons I can get into, pretty dramatically sort of screwed them up, to be quite frank.

And we needed to come back and rebuild an ecosystem for smaller companies, which is what CoreConnects really represents as part of that, an anchored tenant in that ecosystem. And interestingly, it turns out that the JOBS Act was the only pro-capital access legislation in the last 84 years. So I think it's not a stretch to say, and maybe it's a sad testament on the United States that. I'm the only person that catalyzed something like this that's probably alive, because the last time it was the Investment Company Act of 1940. And what bothers me, frankly, is that we just have to get more done.

This can't be the only one in the last 84 years. So we've got our work cut out for us going forward. So this is sort of the hors d'oeuvre, and I'm going to come back to it and make an announcement at the tail end of this that Oscar, I think, is well aware of. But as I alluded to, what was wrong? The SEC decimated our IPO markets.

How did they do that? They went from a telephone-quoted, quarter-point spread market where people smiled and dialed and brokers got paid to tell stories on stocks. And that's essential for small-cap aftermarket support. That decimated the aftermarket support model. and it caused an absolute collapse in small IPOs.

So the chart on the left, these are actually two charts that they put up in the House Financial Services Committee of the U.S. Congress, the actual subcommittee on capital markets. And on the left, you see around 97, 98, that the sub $50 million IPO just all of a sudden. drops off a cliff it has a catastrophic failure and we lose 80 we go from 80 of all ipo's initial public offerings in the united states are less than 50 million and it goes to 20 and it never recovers uh and actually if you if you look at it on an inflation an inflation adjusted rate i mean this would be sort of today the sub 120 million dollar ipo in this dark blue category If you look at the number of listed companies, what happened, and this is kind of one of the failures of government, we went from 9,000 publicly listed operating companies on the NASDAQ and the New York Stock Exchange to 5,000.

9,000 to 5,000. They did not understand this in Washington because the listings were being... confuse the listing figures by all of the closed end funds and exchange traded funds that were being listed.

So if you went to the trouble of pulling from that sample of all publicly listed companies and funds, and just take the operating companies out, you'd see that we actually went from 9,000 down to 5,000. So what do we have to do? We said, you know, look, we're going to have to make it, if the exits for people to go public.

or difficult. We're going to have to make it easier for people to raise money in private markets. And that's what the JOBS Act was all about.

It also extended runway in public markets. I'm going to talk about that in a little bit. But if you look at what the achievements were, as I mentioned, it was seven bills wrapped into one, an omnibus bill.

There were many. We started an entire new ecosystem. There were 88 active regulation crowdfunding. portals now regulated by the Reg CF portals, we call them. That's the statute regulated by FINRA as of October 2024. That did not exist prior to the JOBS Act.

We also, I mean, when you talk about major achievements, we enabled the extension of runways for pre-IPOs and companies to come in with credentializing capital pre-IPO institutions. to basically help de-risk those transactions because they were able to do lots of due diligence that you could never do on an IPO roadshow. So they come in pre-IPO and they do what is called a crossover investment. And that actually really helps these companies get the capital that they need to basically get done major events. So it funded Moderna and enabled, and this is a quote from Lawrence Kim, who was the CFO of Moderna at the time of the IPO.

It enabled Moderna to fund its messenger RNA technology, which led to its COVID vaccine. Think about that. And according to Lancet, it saved two million lives. I mean, that's really rather remarkable.

And I've got somebody saying that they can't hear me. Oscar, can somebody confirm that they can hear me? Okay, I got Patrick Costello saying he can hear me. I hear him. Is the mic off for the stage?

So, and please check the audio. I hope people can hear me. Is there a, can somebody check that for me? Okay, I'm seeing I can hear. Okay, great.

I got people out there hearing me. Thank you, folks. Okay.

So, I mean, these are slides. These are not my slides. These come from the Biotechnology Innovation Organization, which is the trade group for the life sciences industry.

And I want you to just sit back and think about how important this is. What you're looking at on the left is the year that the JOBS Act was implemented. Okay.

And this is right here, this line. And pre-2012, these are the numbers of life sciences, biotechnology IPOs that were done. And post-Jobs Act, and this is one of the only titles of the Jobs Act that was effective immediately.

It was basically shrink-wrapped, ready to go. And they implemented it on day one that it was signed into law on April 5th, 2012. And you can see the explosion in the number of life sciences, IPOs. And then you can see the numbers of investments that were done in biotechnology in the United States.

It led to 18 new... approved drugs in the first five years. I mean, this stuff is so important.

I mean, I can't, I can't overstate that money getting into the hands of scientists and engineers and entrepreneurs at all stages from ground floor startup all the way up. This is the stuff that actually leads to long-term innovation, life-saving technologies, U.S. military leadership, a safe, secure world, prosperity. It is absolutely essential to get this stuff right, which is sometimes why I quipped that it shouldn't be left into the hands of regulators.

But that is astounding impact. So when you think about it, right, one of the titles, which was Title I of the Jobs Act that led to that explosion in IPOs, what's going on behind the curtain is also by getting rid of the quiet period pre-IPO where you used to, as a company leading up to doing initial public offering, you weren't able to talk to anybody. We got rid of that. and through testing the waters and other provisions, made it a much safer place for companies not to jeopardize their IPO and to be able to have deep conversations taking crossover buyers pre-IPO.

And we had literally thousands and thousands of pre-IPO investments that have been made by many institutions, including some of the greatest names in investment history. Fidelity. BlackRock, T. Rowe Price, Wellington, and then in the life sciences area, Deerfield, UrbanMed, and Perceptive. This stuff is really significant because it gives everybody runway and lengths.

You start with individual investors and ground floors, friends and family. You start doing bigger rounds. You bring in institutions, small institutions, private markets. larger institutions, you bring in the crossover buyers, you ultimately take companies public or you sell the company. That is the process.

And you have a life cycle of a company, not just in terms of its development as a business, but a financing life cycle. And if they screw up the way that we raise capital, then and the opportunities we have, they create a death valley. you end up with a lot of unnecessary casualties.

And so what we try and do is to ensure that that entire life cycle is filled in. And it's hard work because, candidly, a lot of the regulators just don't connect the dots. So while we created a framework, you know, the market needed to create a new ecosystem.

And that includes compliance and deal management plan. platforms, which the one that I'm proudest to be associated with is Core Connects. And you're on his call right now, direct marketing and investment banking. And they all provide different kinds of functions. Investment banks are typically FINRA registered firms.

There's direct marketing that's done electronically advertising to reach out to investors, tell stories, and obviously compliance and deal. management platforms that allow you to basically facilitate payment, to receive your securities, to do your Patriot Act work, your KYC, know your customer, all this stuff that makes something compliant in multi-jurisdictions, which is essentially the business of CoreConnects. So I make this point.

then I really believe that this is one of the most consequential of the ecosystem providers because it does enable better processing of a Reg CF, Reg 506C, Reg A+, rather, and pre-IPO rounds. And so, you know, one of the things that we'll work with, and I've been an advisor to Oscar for a long time. He's like my brother from a different mother, right through the front door of... of regulation and doing crossing the T's and dotting the I's.

My vision for him and for Corcoran X is everything that you need to do to facilitate private placements and pre-IPO rounds all the way up to the going public process can be managed on his platform to actually take some of the inertia out of capital raising and bring more capital in so that the velocity of capital increases for investors they get higher higher numbers of wins and and returns and that that capital gets grown and then comes back into the private markets to start up new companies and new innovations and drive the economy forward. So his model, some of the things that it does better and more cost effectively is payment processes, including credit cards, which was no mean feat for him to get done. I sort of watched that painfully over the years.

KYC, books and records and compliance, and he's been... As good as Corkin X has been, as good as anybody doing all of that stuff, probably better. I'm going to open it up to questions for folks.

But what I wanted to announce is before I meet my maker, I'm going to go back and we're going to get an even bigger bill done and maybe more bills done. We're setting up a wheeled foundation for American competitiveness. And the two things that we're going to focus on is the quality of capital markets.

and the quality of human capital markets which is that you in order for you to build the really a really uh battle-hardened successful economy you have to get all your people learning how to how to innovate raise capital and contribute to the economy and that means that people that have historically been left on the sidelines have to be made to put into a position to contribute so Part of what we think about and we will think about with this foundation is all the people that are left on the sidelines that represent an opportunity to increase productivity, whether they are people that have been incarcerated, whether they're people that have been born into single parent households and their moms that can't be freed up to effectively contribute to the economy, whether it's older people working longer, whether it's younger people getting started earlier. that all of these things play a role in getting people to be properly trained, whether we can bring in the best and the brightest from across the world because they're a competitive asset, and how do we get them funded? And so I think if everybody joins in us, I mean, we're going to go out and raise at least $25 million. I think there's a lot of interest in doing this. We're the only one that's been successful doing it in the last, as I said, 84 years.

So hopefully lightning's going to strike two or three times in the same place. But we'll have an institution that will actually be able to institutionalize what we learned and how we did what we did so that if I'm no longer here, we can have other other people that are instant that are actually going through the process of process of caretaking. The regulatory set, the legal set, the statute set that's required to make people like Oscar. empowered to work their magic. So take some questions there.

I was looking to see if there were any in the audience this afternoon, but I know it's a lot to cover in such a short period of time, but it's so important for people, as I always say, to be reminded what it took to get the jobs out here. I think the one message that I got from this, and you correct me if I'm wrong before I bring the panel, is we still got a lot of work to do, right? This was just getting the wheels motioning started, and it's working, but it still needs work, right?

Yeah, it needs improvement. I mean, I want to get a new stock market done that'll take companies public and support them after four to six years of gestation instead of the current 14 to 16. I mean, if you go back to the 1990s before they changed market structure, we were doing. 600 to 900 IPOs a year in the United States. That would on a G because the economy is bigger. If you waited for the economy, that would be like doing 1200 to 1800 a year today.

But we're actually less doing less than 150. And so, you know, when you get when you get more shots on goal, you're going to score more goals to use a hockey analogy. And then I think that. You know, what we're all about here is getting economies to have more shots on gold so that everybody does better.

And and so, I mean, you can't take this stuff. You can't you can't rest on your laurels because there's a lot of knuckleheads out there that will muck with market structure and screw it up because they don't understand it. So institutionalizing people that that really do understand this stuff to continue to do the advocacy. and for all the ecosystem providers that have been created because of the jobs act including core connects to get out there and to advocate for better capital markets absolutely essential to the foundation of all of our economies.

And so, you know, that's what it's a constant job, Oscar, and we got to get back at it. And we it's almost got to look at it almost like fighting for right. And, you know, I mean, as I like to say, when I go into Congress, I put on my red, white, blue epaulets, and I argue for the betterment of our country. And I don't argue the Democratic book or the Republican book or self-interest.

I don't think about what it's going to do for me. I'm sort of saying we've got to leave a legacy here. And that legacy has to be one that actually supports our kids and our grandkids.

OK, it's really critical. And when I when I brought my son one time down with me, one of my kids to go see me testify in front of Congress, an interesting thing happened is that. Almost all of the Democrats and all of the Republicans started the Q&A session by listing off the names of their kids.

It gave me chills. OK, told me that people were really actually interested in in in the well-being, but maybe they just don't know how to do it. And that and that's because they're not experts in markets.

The average congressman in the United States, you know, when he gets elected to office, it's a pay increase and it is the people's house. And so that means that. the educational efforts that we amount.

You've got to be a decent human being with the best intent, and you have to bring your A-game, and you can't confuse people with really complicated stuff, which is easy to do, and break it down for people to understand. And then you can move mountains, but it's a lot of hard work. And in the three years that led up to the JOBS Act, I spoke literally 30 times a year.

to anywhere that anybody would give me a podium. I've spoken for the Organization of Economic Cooperation and Development. I spoke at the G20 in Istanbul one year.

I spoke at the European Federation of Exchanges two years, the Arab Federation of Exchanges. I've spoken at the Tel Aviv Stock Exchange. But in the United States, I mean, if you think about it, Goldman Sachs had me come in to speak at their Buy Side Trader Conference, right?

And part of it was you're carrying the water for the... the big firms because they don't want to be seen as advocating something that's going to make them even richer than they already are, which of course it will. But the good news is it'll make everybody richer. Agreed.

As always, David, I mean, I can't speak for Mitch and Patrick, which all of us, I mean, to this day, we're still thankful for that day, that moment that the light went on for you. you made that change. And today, obviously, our next panel, we're going to carry on that momentum because, you know, the Jobs Act was something you began, and I'll be seeing you in a few hours, anyway, for the beginning of the next one.

But I want to say thank you, David. Thank you so much for today, and looking forward to our continued discussions. It's a team sport, right?

And a lot of this stuff is done by one individual. change you got to train people change hearts and minds you guys are doing that we're part of the same you know bigger team that believes fervently in a better better world i mean if we're going to bend climate change i'm convinced that it's going to be engineers and entrepreneurs and scientists that are funded that are actually going to come up with better ways to take carbon dioxide out of the out of the atmosphere or you know cap methane You know, this stuff's real and it matters. I mean, you know, just look at what happened to the biotechnology industry. It is really the kind of stuff that has the potential done properly to to, you know, save the save the world.

And and, you know, I don't want to be grandiose, but I believe that that's what's at stake. I agree. I agree. Thank you.

So today, I mean, as you heard the. with the opening of this event and and sometimes we we do this um a few times throughout the year or even at events i think we need to be reminded i read something lately that you know one of the things about things that happen we take it for granted and when we take things for granted we don't appreciate what has been done um and today i'm i'm honored once again to have some amazing individuals that i've worked with previously we've been in panels together and hopefully the two of you this was a bit of a surprise that we wanted David to start off the event to talk about the jobs act again to remind everyone in particular this particular audience that we're talking to the intermediaries who often forget that these regulations weren't just about that word crowdfunding that often people hear it's more it's more profound than that and when they do they go what am i missing so um hopefully this is what the three of us this afternoon uh before we get started though i i don't want to jump the gun here who i am but uh i i would like if uh each of you let's start with you mitch if you can take a couple minutes introduce yourselves as we get our panel started Absolutely. So thank you so much, Oscar. And everybody can hear me okay? Yes.

Great. So what a way to kick this off. Like, Patrick, what are we going to do? Yeah, it's hard to live up to that.

Yeah. So thank you so much, Oscar, for having me be a part of your event. And it's always a pleasure to be included. My name is Mitch Avnet. I'm the founder and managing partner for Compliance Risk Concepts.

We are a compliance professional services organization headquartered in New York City, roughly 60 full-time employees. And where we tie into this whole ecosystem is our firm does a lot of work with clients who are looking to register as broker-dealers for the first time and then operate those broker-dealers. And so whether you're registering as a funding portal or as a broker dealer, we specialize in doing the new membership applications with FINRA and then providing our clients with some level of ongoing support of that broker dealer post approval.

And the thing I'll add, which really ties in well to David's comments is, you know, we've seen astronomical change. over the last three, four, five years in our business. And I would say we are a very active filer with FINRA on behalf of our clients.

On average, we've been processing over 60, 65 applications a year with FINRA's membership application team. And I would say by and large, most of those broker dealers are involved in some sort of capital raising. So the appetite is there.

The markets have been. a little wonky as i'm sure uh will agree but i think you know 2025 is uh positioning itself as an okay year and i think there's a lot of money sitting on the sidelines um it's out there but um people are just waiting uh for whatever signal they're waiting for but um we are seeing an appetite we are seeing all sorts of alternative investment opportunities in this world uh all being really fueled by innovation so very happy to be here thank you oscar Perfect Mitch, thank you. It's as always great to have you and obviously it's great to see that your firm has been growing. I've seen it firsthand. I mean every other day you have an announcement you're adding team.

So that's you know that's a positive note. We often overlook the fact that back office when back office providers are growing that's a positive sign something is working. Now we're going to bring the lawyer.

Yeah. And we could let's pick that up after Patrick introduces himself, because that's an interesting comment you just made. Yes. So my name is Patrick Costello.

I am a capital markets attorney from I work at Bevilacqua PLLC. We are a we're technically based out of D.C., but we have firm members across the country. It's fully online. You know, and so one thing that, you know, what we do is pretty much solely because of the Jobs Act. You know, we, our clients are almost all, you know, micro to small cap companies, startups, you know, people with ideas who, you know, like David.

was talking about who need the money to to fund those ideas and get their ideas into you know into reality um and so you know for me while i don't i don't necessarily work much with intermediaries i do work on the issuer side and i do i will answer um you know i will answer com you know the complex questions from those intermediaries and those crowdfunding portals about, you know, hey, is this something that you can do under Regulation CF? Is it, you know, is it not something that you can do? And yeah, I mean, that's, you know, that's what we do.

And One other thing is business planning from start to finish. And with the JOBS Act, it's crazy. You can take a company that doesn't exist three months ago, and then it can raise $3 million in a very short period of time. It's amazing what it's done. Well, you are right.

And your firm. I mean, led by Louis Valois has been there right from the beginning. So it's great to to have you in.

And Patrick, if I'm not mistaken, you did work at the SEC for a while, right? You were an examiner. Yes.

Okay, great. See an inside man. Okay. Unfortunately, no, no.

That's a good thing. So I'm just curious before we get started, when you were at the SEC, were you looking as an examiner looking at companies that were falling under the Jobs Act regulation, or it was just kind of a generalist capital markets? So I was in the Office of Real Estate and Construction, which at the time was kind of a misnomer.

While we did handle real estate and construction companies, they were getting a lot of SPACs funneled into the SPAC overflow from that craze. And so But yes, I did a lot under Reg A, Reg A+, working with Real Estate Investment Trust. That's where I learned about Series LLC offerings, which is a very interesting and I think underutilized form of raising capital in today's day and age.

Yeah. And so mostly real estate and construction companies, but every- all those facts as well. Well, this is great. I mean, so for everyone, obviously having David lead the afternoon off. So what's our objective in this panel?

So our objective here today is that there is this rise. And as I said, a couple of months ago, we published data and data is like anything else. It can be very powerful when you start dissecting it and you start looking at it.

And this comes back to the growth of what's going on with. Mitch, and I'm sure it's happening with you, Patrick, as well, whether issuer or non-issuer related. But the fact is that in less than seven years, I mean, this is something that has to be really understood.

Even though President Obama signed it in 2012, it was a number of years before all the regulations came to light. But the reality is that in a very short order, the JOBS Act regulations has penetrated $150 billion. So people are now shaking their heads. They're saying, okay, wait a minute.

What am I missing? What should I be adding? And this is where Mitch's firm come in. So we're going to talk about seizing the opportunity from an intermediary point of view, whether it's a funding platform. Patrick, you let in something really great.

I 100% agree with you. I think a lot of people do not understand the LLC series, which is very unique to the United States. No other country in the world has that. Not every state.

either. That's right. And in companies, it takes a while.

Half the time, I have to do the presentation three, four times for people to kind of get their head around it. But it is important that we look at all the aspects of today. We're not going to be able to cover all of it, but I think between the three of us, we will have a really good understanding.

And I want to start the framework with the following that, you know, obviously the jobs act. is there from the capacity of penetrating 150 billion into a fairly large market, which is 4.45 trillion. And so what does it mean? Is it going to penetrate more? I truly believe it will now because of the entrance of technology.

But in order to do that, Mitch, we need guys like you. I mean, there is. Here is where I want to ask you this. Good luck. No.

Okay. Well, we were getting to that. Okay.

But let me ask you this. It's, you know, one of the assumptions I made when I got into this 12 years ago, well, longer than that, is that I assumed everybody was using technology. And boy, was I, boom. Maybe I didn't indicate how I meant people were using it. they were using it internally in some sort of mechanism using third party vendors to kind of grab things manually and do it electronically and then manually back and forth i was i'm still shocked that it still goes on but that's the opportunity So, Mitch, let me start with you.

So the Jobs Act, I believe, you said 65 applications per year. I think it's going to grow. I think there's going to be more of that.

How do you see that transforming the back office world? How you look at helping companies or firms that are wanting to get registered and also capitalizing on the Jobs Act? Yeah, so great question.

I think first and foremost. i'm an evangelist for innovation okay but there has to be innovation with the right controls governance governance risk and compliance oversight um because there are everybody that comes to these platforms or even you know whether it's a funding platform looking to raise capital or even a broker dealer unfortunately we live in the world where they're not all princes and prince uh princes and princesses um and there needs to be good vetting process in place to ensure you know who you're dealing with and that you've done appropriate due diligence and that you've taken all the necessary steps. And you're absolutely right on leveraging technology. There has to be an intersection of technology with compliance and vice versa.

From a volume perspective, it's harder and harder. to do these things on a manual basis. And the truth of the matter is you can never scale a business unless you implement ways to do things more efficiently.

But having said that again, you can't just flip a switch and rely on the switch to do what need be done. You need to have that expertise either residing in-house. And for a lot of these early stage companies, they can't afford to hire.

all this middle and back office sort of staff. And they rely on third parties like CRC to help them maneuver through their regulatory burden. And so at the end of the day, the industry, from a regulatory standpoint, is always going to be a close follower as to where innovation is going. And it will always take a minute for regulation to catch up with innovation. But...

I have lived a 30-plus year career of being a close watcher and figuring out how to follow the money and where that goes. And then we figure out as an industry how to incorporate these things into our framework. And not necessarily having to reinvent the wheel, but thinking about how to modify that wheel to incorporate other aspects of capital raising into our ecosystem.

Just like anything else, I'm not a big believer that you have to throw the baby out with the bathwater in this scenario, but you have to think about how can you incorporate that within an existing framework. And when that framework is not where it needs to be, my concern for any and all of our clients is, what are you doing from a best practice standpoint that when the regulator shows up, you can show them what you did to vet and to evidence your program. And so leveraging technology, being able to point to that technology is one thing. But as the human, you know, and maybe I'm, you know, listen, I'll be long gone, I think, before AI takes my job.

But we shall see. But the long and the short of it is where is the human intervention and what is going on in that regard that you can show that you have thought about your program comprehensively between the use of technology and. relying on experts that have been there, done that to help guide you accordingly.

You know, it's rather interesting that I'm going to, the wording that you used was perfect. You know, their technology does not remove the human aspect of it today. I think this is, whatever firm is listening to this, this is important. You still got to do the job.

You still got to do the work. The... Let me just add on with me because you're saying some good stuff too.

I see this all the time in my business. People confuse technology and process as one and the same. They're completely different things. Okay.

And who has lived in the world where saying, you know, our technology sucks. We need to go out and find a new vendor because that'll fix our problem. And anytime a client starts out with that, I say, sure, we can go out and do that.

but you're going to get to the same garbage, but maybe a little bit quicker. And so it's really understanding your internal processes and how you're leveraging whatever technology you may implement or deploy and really taking that into account as you create your holistic program. I agree.

I agree. And Patrick, this is going to lead into you because, you know, I brought you into this panel purposely because it not being on. No, it's seriously because I am a believer in the following thing, I think. But Mitch, see, think of it this way.

Mitch is on that inside. You're on the other inside. And here's the problem. There's something in the middle.

Yeah, client. And exactly. Mitch is, you know, helping them being compliant, make sure that.

if they are going to use technology, make sure there's redundancy, accountability, attestations, and all that. And then there's you, the lawyer. And I run into situations that we have to remind a lawyer, hey, excuse me, this transaction is going to happen 100% online.

And Shaken said, you need to modify that subscription agreement. Something very subtle. And I want you to talk to us about that, your role, even though you're looking at it, how does that interact with you?

you know the company's going to be using whatever form of technology. Because capital raising today, this puts the broker-dealers on the hook as well. I mean, there's some data I'm going to share with you guys today that Sarah Hanks and I came to light a couple of years ago about subscription agreements. And who's on the hook?

Mitch, the broker-dealers. Yeah, a lot of it is... Sorry, Mitch, go ahead.

No, no, no. A lot of it is proper planning. And so... When I go into, I'm getting a new client for the first time, I'm thinking, okay, you know, is this a client with a startup?

Is this an established business? You know, do they have, do they have their documents in order? Do they have everything planned out?

And part of that is obviously having, you know, the correct terms in your subscription agreement that allow you to electronically sign them or, you know, to make sure that you have people agreeing to the things that they need to be agreeing to, you know, in terms of, are you a non-accredited investor investing under Regulation CF? Are you an accredited investor? If you're an accredited investor, are you confirming that status?

Are you, you know, supplying the proper documents? And all of that is, all of that kind of starts and unfortunately ends at the agreement because once it's signed, that's where it is, right? going to thousands of non-accredited investors or any investor, any type of investor to try and get them to agree to add something in after the fact is just, it's not possible. I've been on the side of trying to get 10 lenders to agree to a transaction.

It took up all of my time for two weeks, right? Just going back and forth saying, hey, what do I need to get this waiver from you? That's another issue of needing waivers. But I think it really comes down to what you said, which is proper planning and having those things in place and knowing how you're going to execute on your ideas and your plans. And I'm not, I mean, but Patrick, when...

but you're on the planning and i'm not trying to put you on the spot for you or your firm or anything like that and i'm bringing these questions up because i see it every day right so um this is the world that i see everybody does everything the auditor does their thing and he goes i'm done boom right um the lawyer i'm not suggesting all here it is and i'm i'm out it's i'm out of my hands um and then the broker dealer sometimes doesn't have not everybody calls mitch even though i tell them to Not everybody calls Mitch because if they bloody did, excuse my language, if they bloody did, I wouldn't have to go through so many headaches of trying to explain to them that a checkmark is not a signature. Right. You know, right.

Something so simple like a checkmark is not a signature. It's an acceptance of something, but it's not a same thing as a signature on a document. And so those are the kind of things that I think I innovation.

is rapid. I think it's important. And because of the JOBS Act, that penetration is going to continue to grow.

But with that, I think there are going to be firms. Look, I lose business sometimes because people say, Oscar, you're too rigid in your compliance. Okay.

But then I always listen to Mitch. In the back of my head, I'm going, you know what? I'd rather lose you now because I don't want to be going through an examination with you in FINRA. where it's going to waste my time and money to help you to get out of this get out of jail card.

because it ain't gonna happen right so the the finra and the regulators are getting smart about the players so what i want to know from the both of you mitch i mean patrick is so often on the client side and and bringing the to the bd you know whether it's a funding platform how are you guiding broker dealers as they enter this how what will you think the lawyer place into that discussion to make sure that you know here i got all the company did the due diligence and The last thing everybody looks is that subscription agreement. I'm tying into something here. So it has to be a careful and close coordination between all the folks involved, whether you're using in-house counsel or outside counsel. That lawyer needs to have a seat at the table in terms of that process of bringing that issue to market. OK, and and, you know.

At the end of the day, too, we have clients who are approved as private placement broker dealers. But when they got their approval, they only were approved for Reg D. So I was like, don't assume that because you were approved for Reg D, Firmware says that you can do Reg A plus deals or you can do Reg CF deals because different beasts. OK, and there's so much there are so many other complexities.

Mr. Institutional Capital Razor, now that you want to do reg CF deals, right? And so one of the things I do caution our clients, especially if they're not new entrants and we're registering for the first time, because we'll go through that exercise with them. Are you going to do CF? Are you going to do reg A?

Are you going to do reg D? We need to add all of that into the application. So chances are FINRA is going to tell the broker dealer that was only originally approved for reg D private placements, that they have to file a continuing membership application because that will be a material change to their business because they have to do things in a different way to support these deals versus a traditional 504 or 506 deal under Reg D. So that's one thing that we always do cover with our clients. And the other thing, and I say this and I've said it probably at least once a week for the last 12 years since I launched my business, don't dabble. The one-off will get you in trouble.

Unless you have the operational expertise, operational breakdowns will most certainly lead to regulatory issues. And Mitch and Patrick, there's the regulatory issue. I mean, the party that I'm seeing getting slapped lately has been the issuer. I was stunned recently to hear from a client storytelling. after their capital raise on a registered FINRA platform, who then didn't provide the adequate data and then the company got penalized for it.

So I do agree with you that more needs to go into it. And I like the notion that everybody needs to be brought together. I think one of the educations, sorry, I'm just going to finish this.

And the only thing that I was going to add is that I see that technology can improve. someone's business if you know the process already, number one. And the last thing I'm going to add before turning over to Patrick is we always ask in terms of these workflows, you know, who's broker dealer counsel, who's issuers counsel.

And we have many go, no-go kind of calls in terms of understanding how this thing is going to launch. So it has to be a very, again. careful, close, coordinated relationship with all the parties from, you know, from the issuer to the broker dealer or the funding portal to ensure that the customer experience is what it needs to be. Yeah, Patrick. Yeah, you can continue.

I was just going to say, you know, just trying to tie it back in a little bit. I find myself being part of that human element in that I, I... Part of my job is I have to go and make sure that everyone is on task. They're all their review is done. They're not reviewing something, trying to make sure that they're not reviewing something an hour or two before the company wants to file. You know, making sure that I'm talking with everyone, giving them the documents, getting their comments, incorporating those comments.

You know, those are just yet. It's coming. Not yet.

That's part of my job now. When technology can do that, I might be in a little bit of trouble. You know, bringing that human element and the relationships to be able to call up a funding portal that a client wants to work with or and have those those connections from day one. So, you know that, OK, your lawyer and your broker dealer or your crowdfunding platform have worked together before. They're familiar.

They've seen these documents that you're going to use. They've they've. reviewed them many times over. They know what's inside of them.

And so, yeah, I think that, you know, making sure that everyone's talking is a really big thing is because that's how things fall through the crack. Right. And not only talking, documenting and evidencing what happened and transpired.

And again, I'm not an attorney, Patrick, but I love saying this always to my clients. Testimony is not evidence. Yeah, I. Yeah, that's a great point. I really love getting startups who just have their ideas because then I'm making sure that I have the organizational resolutions.

Every board member is approved by written consent. Everything's written down. Everything's formalized. And. And, you know, and in a place where you know where it is, that's when it's easier.

That's how you make it easy for broker dealers and the other intermediaries to come in and say, hey, we see what this company has. We know what they've done, what they're doing. You know, keeping a paper trail is really important.

Absolutely. You know, it's I'm so glad that both of you are talking in this tone. You know, it. You have to understand, I've been doing this for a long time.

I'm a little older than Mitch, right? So I'm just Latino. That's why I keep it going.

You look good. Yes, you look great, Oscar. Thank you.

So, but it's interesting, you know, 12 years ago, when I would tell people about this problem, people would laugh at me. No, no, no, Oscar, come on. It's only 10 investors. It's not a problem.

I go, try to imagine 1,000. How about 100,000? How about a million?

Try to imagine. They couldn't. They couldn't even, you know, they...

They couldn't even figure out how that would be managed and so on. But let alone how to bring all these participants that are so important, the FINRA broker dealer or the registered funding platform, who then there's a lawyer, there's an auditor, there's an escrow provider, a bank, there's a payment rail provider, because a lot has changed in the last couple of years. That industry that kind of sat by and said, oh yeah, use us, have woken up.

They're like, wait a minute. We need more verification. We need to know for sure that Mitch is real. We need to know that Mitch is really a FINRA Boca dealer.

They're finally doing their homework, which is great. Kind of puts people off. But what I notice now is people need to come together. And you both said it. You both need to work together.

Mitch said it. You need to document everything. Attestation, record keeping.

And what's the record keeping? When did you give me authorization for this? So there's an authorization trail as to who's who approved this.

One of the things I noticed with an examiner at FINRA, they were asking specific questions about when did the investor make the account open? When did the investor make the investment? When did the investor provide the payment details?

And when was the money taken? And people go, well, what's the big deal? When was the money taken before or after KYC? Hey, something so simple people go, but It's obviously it's simultaneously. Well, not really.

It can't be simultaneously. Yeah. Because the banks don't want you taking money from someone who's. So those are the, I think this is why I'm a big advocate that everyone's coming together.

We keep thinking that it's the broker dealers that are the only ones that need to change. I believe that's why I brought you here, Patrick, because it's the lawyer, the broker dealer, the back office providers already educating. the broker dealers and the funding platforms that they need to embrace technology, but not lose sight of the fact that they still need to follow process. And they need to do it for to protect everyone involved, not to put a close eye because we did notice for a number of years, just so you guys know, that nobody was paying attention to subscription agreements.

So subscription agreements online require very unique clause and only certain law firms knew about that. And that if you didn't, there was no binding agreement between the two parties other than it happened online. Now, there could be a big argument about this, but nobody ever took it. But the point was that if somebody ever did decide to, boy, you can unravel a deal really, really quickly. Mere fact that this agreement was not meant for something was being done online.

And I think this is why we're catapulting to this is because we're going to see more of it and we're going to see a very different type of investor. So everybody keeps thinking the only investor that we're after is the individual. No.

As you heard David today, for the growth of our market and our clients and the people we work with, we need the other investor, the institutional investor, the qualified investor, the VC, the LPs. For them, documentation and attestations in the process is everything. They need everything.

So it's a so but the only way that's going to get there is if everybody starts working together. So so Mitch, let me ask you this. I mean, are for the clients that you have. Obviously, you're working. Are they are you seeing the movement towards them using online tools for onboarding their clients?

And I hope clients meaning here the investor and the issuer in order to navigate that path or if it's still like a 50 50 split. So if you look at the registrations we've handled, it's probably a good example to to to analogize to the tech enabled companies that we're dealing with. Use tech.

So it doesn't matter what they're doing. They're using automated processes and APIs wherever they can to tie all of their processes together. But every now and again, you get a very traditional shop that is still using spreadsheets.

And so, and... The world runs on Excel. Yeah, and to the first comment you made, I think, at the beginning of the conversation, I've been a compliance officer for over 30 years and run this business now for 12. You and I don't think you'll be surprised often because you said you're not surprised anymore. But you think you're dealing with certain levels of sophistication if you associate them with a household name.

And I'm here to tell you that that's not necessarily true. I know. I know.

It's it's heartbreaking, especially. We've all seen the fines and the sweep that the SEC and FINRA are after. So you're right, because we're dealing with human beings.

I mean, we're not robots. We're not perfect. But I do believe that technology can play a pivotal role in accelerating certain things. But I think to Mitch's point, and yours as well, Patrick, I think it's just as important to remind everyone that, hey, you can keep forward. So but do not overlook the fact that there's still a human aspect to this business.

It's still a human decision-making process. And said differently, you can build the process within technology. You can assign the process to the technology, but you own the risk. That's it.

Oh, I love that. Oh, I'm going to quote you on that one. Did we get that? Oh, I got that.

I truly did. Oh, Mitch, that was beautiful. Seriously, you're right. You're right.

You know, because you're right. As a technology provider, you know, I'm sorry, Patrick, I didn't mean to cut you off. I just need to add to this.

As a technology provider, the last few years, I've been kind of like, I go by what Mitch says. This is why we provide it. I'm not willing to budge.

So my team said, Oscar, you know, they're big. They're old enough. They're adults.

They can make their own decisions. I said, okay. start taking some of the wheels off but here's what i want whenever someone goes off the rail i want a signature a date a stamp and i want it all and i want them to understand that they own the risk now i agree with you there's a process you own the risk to that new process you've taken on because when finra comes in often not today two years from now three or four i'm i'm gonna be ready here's my documentation this is what you opted out for and the rest is on you there but they need to be educated on on this and it's i love that quote thank goodness we're recording this so i i don't have to write it down completely sorry patrick i didn't mean to cut you off when we were started there no i i uh i don't think i i was going to say anything so don't worry about it no i no no it's good so look obviously the the objective of today for all of us we're trying to inspire new broker dealers uh and And hopefully what they're hearing today is that not only if you look at innovation. as Mitch alluded to, you need to look at your licensing aspect of it to make sure that you're able to do it. And if not, you know, you need to find a way.

You can't just jump in, put your feet in and test it out. This is not like testing of the waters that David Weill was talking about. That's more for the issuer from a broker dealer perspective.

And then, of course, making sure that they understand the legal aspect of it, the arm, which. We'll make sure that the issuer, they're getting their data, their information in a way that either the broker-dealer or the platform will be able to operate without having any liability to them. Because ultimately, I don't care what regulation a broker-dealer is operating under, I believe they take on the liability of anything they present to an investor.

Whether their regulation BI applies to them or not, because some of them... I understand that they can indicate that their real client is the issuer, but this will not give them a pass if negligence is not being looked after, right? So, and this is where I, this is why it's important, again, from compliance perspective with you, Mitch and Patrick, is that both of you are right at the front lines. So, Patrick, let me ask you this question.

So, you know, you've been talking about... how you make sure from a lawyer, make sure everybody's getting the files done, and you're working with a platform or a broker-dealer. What are your responsibilities from a provider to ensure that the platform or the funding platform or the broker-dealer is going to operate in such a way not to put your clients at risk from the offering that they're doing? This leads to what Mitch was saying earlier, right? Yeah.

So I think that part of it is, I guess this might be a related point, but making sure that you're planning for the occurrences that you don't want to happen, right? Making sure you are doing things right. And, you know, in terms of risk. Do you have all of your risks adequately disclosed?

Are you protecting yourself? And it's the same on the broker dealer side. And I guess I don't know.

My dad always used to tell me if you're going to do something, you should do it right. Right. Or don't do it at all. And it's maybe we've we've lost that a little bit.

But I think the general principle is one that everyone should keep in mind, which is that you want to. plan for the worst and hope for the best, right? So you're going to want to make sure that you're working with people who understand the compliance issues and making sure that you're doing all of your filings right.

And that on the issuer side, you are making sure that the company is protecting itself as much as it can under the regulations from those risks, and then making sure that the broker dealers are aware of those risks and are reviewing them and knowing what the company is possibly liable for. And yeah, Patrick, but let me ask you this. I mean, so how, I mean, typical lawyer. Yeah.

Sometimes I'm in the middle of a lawyer trying to explain to them, hey, listen. the direction you're taking your client to, there are certain things that you need to watch out for, which again, they're not blatantly obvious, right? And so is it the responsibility of you to, on behalf of the client, to go to the broker dealer or the platform to ask these questions?

Because it seems to me nobody's asking them. So what's happening here, does that make sense? Yeah, yeah, I agree.

I think that, you know, educating... Okay. educating our clients with how things work, what the broker-dealers or the funding portals are going to do.

And then if they have questions and if you're unable to find them out yourselves, being willing to go and talk with those broker-dealers and ask them. And if they don't know, then obviously there's going to be an issue, right? The question is, why did you pick that broker-dealer? You know, and here's an example.

I just, because this is what I mean. Nobody, it's almost like everybody's afraid to say it. For me, we've gotten to the point now that.

this thing is getting so big that if there is a blow up or not so much a blow up but you know things go bad it can hurt everyone and i we don't want that anymore but when when a broker dealer signs up and has to dabble because we've seen this before i get on the call and i tell the broker dealer i'm sorry you cannot act on this issue oh but my lawyer said it's okay we'll get your lawyer on the call because he clearly doesn't understand that you need to be registered in all 50 states and you need to be registered for reggae because how is this company going to make raising capital with a broker dealer that's only registered in five or six states, right? So those are the scenarios that we're seeing a lot of, right? We're seeing a lot of this.

And the lawyer often doesn't say anything. And so we have to be kind of like the bad person to come into the picture and break it up. But I feel like that's why this is so important, bringing the two of you together is because I want to make sure that the dialogue for anybody listening in. is that the only way we're going to improve using any form of technology, let's put that aside, improving anything in the processes, is that nobody's working in silos. See, this has been the problem.

I think the private capital markets, when I got into it 12 years ago, just so you know, there was no data, nothing. Sorry, my apologies. Pitch book and crunch base, and that was it. So if you were the 1.5% of... companies fortunate enough to receive venture capital money which i applaud you no problemo your data was visible everybody knew and and so on but the other 98 or or more nobody had a clue and and this is where that the the jobs act came in right it opened it up it exposed it it was starting to see more of it there's thousands of lawyers and auditors and people work in these silos they operate in silos um I believe silos are probably the most destructive thing in the private capital markets because look at how the public capital markets works.

They work in one. There is no a stock exchange system that you're not part of no matter what mobile app you download. You got it.

That's because there's one that moves it all together. So I'm a big advocate of this right now because I'm seeing more of it and sometimes you get blunt. but it goes in deaf ears because they don't have a myth working with them in the background or sometimes even the guidance they're getting it's it's it doesn't have all the the facts that that are coming in so let me ask you a question mitch leading to this is that so lately finra has been very aggressive in its examinations uh which it should be uh constantly and if you got your books in order it should go really quickly But something that happened in December 2023, you know, we read the update and their clarification. And when I went to talk to some of our BD partners, they would say, well, that's just a guidance.

So tell me how you as a back office provider deal with when FINRA is publishing something, they're obviously aware of something and they're providing. under the guidance notice. But it doesn't sound like a guidance. It sounds like they're saying, follow the rules, but people say, but it's a guidance.

Unfortunately, I've seen in many exam scenarios where the exam, and I think the problem, and this is not just specific to this issue, it's specific to how we regulate as an industry, is there's so much subjectivity to it depending on who is examining the firm. And so there might be guidance out there and the examination staff might say, well, why aren't you doing this? This is our guidance. And you could say, well, that's not a rule.

Show me where the rule that it says I have to do this. And they're like, well, no, but it's expected that you're going to meet this standard just because we publish this guidance. And it's a slippery slope. Right. And so what we like to do, and again, given the amount of clients that we support.

support and the amount of broker dealers that we support and the beauty of what we enjoy as a company and working with our clients is we can build a consensus pretty quickly as to who's doing what and where they live in the risk spectrum. So who wants to be in the middle of the road? Who wants to be to the left?

Who wants to be to the right? And so we love the opportunity, of course, on a confidential, anonymous basis saying, we think you're off market or... we think you're way too conservative based on what we're seeing or you're way too aggressive or you're right smack dab in the middle.

The thing with compliance, and I say this all the time. is there is no competitive advantage in compliance. Okay. As an industry, compliance departments and compliance officers get better by creating that continuity and consistency, how we do things from firm to firm, to firm, to firm. So when the regulators come in and they can see, this is how Oscar does this.

This is how Patrick does this. This is how Mitch does this. There's safety in that because they now know that this is the standard. And it's generally accepted practice in terms of who's doing what and how they do it. So I always say this.

So we all benefit from doing your events, Oscar, or roundtables or webinars, because we all help each other get better as an industry. But there's no one there's no secret sauce to compliance at the end of the day. It's really a community of thought, of processes and sharing. And in terms of silos.

I get what you're saying. And I think in and of themselves, silos exist organically. That's just the way things are.

But what what do you do to address silos? Getting back to your other point is you create communication mechanisms within organizations to make sure everybody is speaking to who they need to speak to, especially from a risk management interaction with the business. I can push back a little bit. I would say that there's.

value in showing that you're trying to do what you should be doing, right? Oh, I'm not going to argue with that. No, of course there's value. And I'm not suggesting you don't do what the guidance says.

Okay. But what I am saying is, especially if there isn't any widely accepted market practice, when that guidance comes out, clearly that guidance is being issued for a reason, right? There's concern over whatever it may be. Why is that?

And what are you doing to safeguard against whatever that may be? But, you know, what I think what often all broker-dealers struggle with is FINRA is very good at telling you what they don't like, but they'll never tell you what they do. Thank you for all those emails I've been sending.

And again, that's and that's just how our regulatory framework works. OK, but I will say this in fairness to the regulators. We have seen, you know, greater expertise, knowledge, capability in terms of the examination staff. Regulators are hiring from industry now, which I think is super helpful. OK, and so you want to work with people who understand the business.

Right. And there is value in a lot of intrinsic value in that. So and I always think a good, careful coordination with your RMA at FINRA and being open to building that relationship does nothing but help you as an organization. I agree.

You know, it's it's it's it's likely the same. On the issuer side, having a relationship or being known at the SEC is a step, puts you ahead of everyone else. I mean, I remember working there and being told that, you know, it's OK to adjust your materiality standard and how I'm, this is my words, I'm paraphrasing someone else, obviously, but it's OK to adjust materiality standards.

If you see a Chase Bank as an underwriter on there or a Citi or something like that, where the SEC will recognize that those underwriters have the compliance, they have the money in those sectors or in those segments of their business, and that the SEC feels comfortable that they're following the rules. And so... They trust them and they trust the due diligence that they've done. And they see that, you know, and they can say, oh, maybe we'll know. We won't give this a review.

Right. Maybe. Well, it's that familiarity. Right.

And and that's, you know, in terms of how you're analogizing, I couldn't agree more. It's that safety in that understanding. Right. And but at the same time, I could say this.

You can't take your eye off the ball. Right. I like. I got one for the both of you because it applies to you, Pat, because you were at the SEC. And because this is staring right at me at us.

So in one side, we have FINRA examiners saying, this is what you got to follow. And then we go look outside and our clients are saying, but look, that one is doing it this way. Totally different than they're doing here. And so the BD comes to me and says, no, no, obviously if they can do it, I can do it. Well, hey, I'm not here to tell you one way or the other.

So I decided to reach out to Adam Urkel. I went right to the top. I was reaching out to everybody and looking for guidance. Boy, did I learn that.

You're right, Mitch. Friend, I never provide guidance. Interpretation. That is the word that he taught me that.

Yeah. And, you know, listen, we get this a lot from our clients. And listen, the one thing that we pride ourselves on as a company is we're very commercial in our approach towards, you know, helping clients establish a good. compliant program.

But at the end of the day, let's not fool ourselves. We need to facilitate the business that they need to do, albeit in a compliant manner. But I can't tell you how many times I heard, well, why can they publish this sorts of material and we can't?

How did they get comfortable? And unfortunately, I can say this with a straight face to my clients. I'm like, I don't know and I don't care. how they got comfortable. I'm telling you what the requirement is, and this is what you need to do to comply with that requirement.

And I think, listen, you also have to do this with an understanding of the current regulatory environment, right? If it's an enforcement-driven environment, do you really want to play around with stuff like that, okay? And my answer is no, okay?

And so, unfortunately, the rule is the rule, and where others may have gotten comfortable interpreting it in a way that just doesn't make any sense, sooner or later, the regulators will catch up to them. Thank you for that. It gives me comfort because about a month ago, I was very critiqued on, because certain regulations have very specific requirements for onboarding.

And in my view, and in the interpretation FINRA has provided, it's very clear what those steps are. It's unfortunate, but, you know, whether it's running your business, Oscar or Patrick, your practice or even in my business, we have to be risk managers. Right.

Yeah, exactly. And again, you don't want to be on the hook for giving bad advice just and but at the end of the day, you know, and again, even if it's something like where others have gotten comfortable publishing and their marketing materials, targeted IRRs, you can't do it. Okay.

As a broker deal, you can't do it. Okay. I don't care who's doing it over there. Doesn't matter. I know this for a fact.

I've dealt with the marketing and ad review team at Nozgum on this topic. So just as an example. No, thank you for that.

And Patrick, from your end, I mean, you were at the SEC. How, I mean, is it any more flexible than FINRA where every, you were just saying you had some flexibility. I don't want that. the wrong word.

Sorry, I didn't mean to imply that. But you know what I mean? It just because sometimes from the outside, it looks unfair, right?

We look like we're so rigid. We're not going to use your infrastructure because the other one is more flexible. Well, okay. B as in A.

Yeah, you know, it's an interesting intersection because you have the securities laws, which are at times extremely vague. And they're extremely vague on purpose because they give the SEC the room and freedom to operate and and propagate their rules. And then even when I worked at the SEC, it's like I have these internal guidance that that they have given to all of us that no one else knows about. But when I'm on the phone with issuers counsel, I'm not really allowed to say anything to them. All I have to say is, well, you can submit your registration statement and we'll see.

So that's not necessarily a high opinion of the SEC. And I don't know if I necessarily have one at this point. But I think that the SEC could do a lot better.

with making it clear what they're expecting from people, especially on those phone calls when you're working with issuers. I think it's, you know, I might be getting off topic a little bit. No, no, no, no, no. It's, look, it's, I think. Look, I've been on the other side with clients when they're filing.

And you're right. We want to show everything to the SEC. But sometimes they're with a funnel, right? I remember when we were going through our process some years back with Sarah Hanks.

And we were ready to do the whole spiel. And she goes, no, you just got to go A, B, C, D, E, F, G. And you got to describe it this way. And you're right.

They're not a merit regulator. All they care about is. are you doing what this rule says you're doing? And you're doing, you know, you bring up other people doing it one way and Mitch, and I agree with that a lot.

And I think it's something that I, I come across a lot in reg CF just by nature of, of what. Oh my God. Okay.

Now we nailed it. There it is. See, there it is.

And not where I'm having my problem today. I am. This is where I am. I am pissed to one entity. Sorry, Mitch, but this is where I'm standing firm here because I don't want to get into trouble because they already came in, examined.

Right. But, you know, you know what I say in those instances, Oscar, that's probably the best trade you can do all day. OK, because that's a problem.

Yeah. OK. At the end of the day, if somebody is looking to take these shortcuts, let's just call them that shortcuts are not being held to the standard that you're holding them to, then.

their potential problem for you. Okay. And, and, and so I always say this in our own business, sometimes the best trade you do is the one you don't and let them go elsewhere. Yeah. Yeah.

And it's, it's such a unique situation in terms of, you know, other than, than, than Reg D obviously in 506C and 506B, but being able to raise up to $5 million and rolling 12 month period from non-accredited investors in an offering that the SEC isn't looking at. They're relying on the funding portals and the broker dealers to do that compliance and risk analysis and making sure that they're offloading their review process essentially, right? It's a unique situation that, you know, despite what David said, it might not be around forever. They could very well change those rules.

And, you know, if they got more funding, they might put people on and try and get them to start reviewing some of these things. And I think if they did, they'd probably find a lot of issues. Because like you said, there are people doing things that... I mean, I can read these rules and that doesn't seem like it's legal, right?

That's right. Oh, my God. Were you talking to Peter Danico? You know, Peter is emailing me today.

You know, he emails me, goes, Oscar, it looks like issuers are allowed to do this via email. I go, Peter, here's the Bible that Sarah Hanks wrote on advertising. Look what it says there on email.

It's pretty black and white. You can interpret. But I feel for him.

I really do. Because he's in the front lines and him and Jack and Jessica, they're hearing it. And I now see the confusion.

So here's the problem in all of this. When there's that kind of confusion, the issuer is the one that doesn't know. Oh, they care about it.

This guy is saying this is the fastest way and I could do it this way. And I can do this, I can do that, I can use a call center in Canada. Oh, you're going to know that one. Yes.

a call center in Canada and I'm going where's the broker dealer in this isn't he flipping out yet because I know I would be I don't know much but you know America Canada there's a line data uh calling investors on licensed brokers uh so um no I look this was uh not meant to be but you know it's not so much we're painting the dark side of anything but we need to be blunt about the fact that as David said the regulations need uh uh for the work in which he's working on and he's never going to stop if you've seen that i've i've been fortunate my whole life changed when i met him 12 years ago i came from the public side the stuff that i saw there just made me vomit right i mean but now in the private i really prided ourselves that it would be better and different and it is it can be better um but now i think i i think we're at the next evolution of it all where everybody's gotten comfortable. Okay, good. I'm a broker dealer.

I'm a funding platform. I'm a lawyer. I'm an auditor. Okay. Now we've got to work together.

Okay. Now we all got to be on the same. So one of the things that we did in our infrastructure is that. Nobody can go to a bank or a payment provider or a broker dealer without a bad actor check.

And people, what do you mean? That's so simple. No, I know. But simplicity sometimes is the smallest thing that matters.

You cannot transact. And why? Because the bank is going to ask for it.

And they're going to ask for it. Why are they asking? Because they now know what it means when they see it.

We're trying to protect them because we don't want another banking shutdown. And this is the thing that people need to be aware of. Just because one decides to not do it, what is the ripple effect? Well, it could affect a bank. It could affect a payment provider.

It could affect a company like Mitch's who got something that they didn't see or anything like that. So that's why sometimes I bring the dark side of it a little bit so people can become enlightened to it. But it doesn't diminish the fact that we are sitting in one of the greatest transformation in the private capital markets. And even to David's surprise is that it's still. evolving and growing.

So in closing off for today, Mitch, obviously your firm has been growing. We started at the beginning. You've grown quite a bit since the Jobs Act.

Every other week, I see you're guiding people. So it's obviously flourishing for you. How do you see the next few years for you as more firms or new ones and current ones adapt technology to change the way they do their operations? Yeah, I think, listen, I think, you know, and this isn't a political, like, I'm not, I try not to be a political person.

But, you know, the good news is, from a compliance perspective, as far as I'm concerned, you always need it, right. And so if it's a market that embraces innovation, you need compliance to really help figure out how you deal with and regulate innovative new business aspects. or asset classes or processes and if it continues to be an enforcement uh environment well you need us for other reasons and so so uh so at the end of the day i i i don't have any crystal ball but i really feel as the market continues to evolve and there are more and more tech enabled players who enter this space who want to be part of this process where whether it's private equity markets or private debt markets, this is where these are the investment banks of tomorrow.

That's the bottom line. Okay. And so we are smack dab in the middle of that.

And as much as we love dealing with public issuers and dealing with public companies, we really love to cater to emerging entrants into the market and support them in ways by giving them scale where they wouldn't have it. So. The goal is to do more of the same, if that's a good answer. No, it's great. I mean, like I said, of all the firms in this space, when it comes to compliance, you guys keep growing.

You've got a great team there. And so, obviously, it shows that people are now paying attention at all levels, big firm, mid, small, small, medium, large. And just because you have a good idea. doesn't mean you understand the regulatory regime in which it operates.

OK, and so work with your attorneys, work with your providers who live and breathe in this space every day. It's very easy to misstep. And and, you know, this is not an environment. You know, the world of asking for forgiveness doesn't exist anymore. At least I don't think it does.

And so, you know, 20 years ago when I sat on a trading desk, you know, the. the the the the the the the standard operating procedure was we're going to do the trade and we'll pay the we'll pay the traffic ticket that world does not exist anymore that's the thing oh my god man you are full of quotes today you're like man i got i got a few of them going all right but thank you so much for for for having me and it was a pleasure to to speak with you and with patrick so i appreciate it thank you it's always great it's always great i um I enjoy them as well because we're all kind of, I know we don't get a lot of time to do the grainy and specific because of privacy and items, but talking in high level, some of the changes. And of course, Patrick, from your firm, I mean, you know, Velocon has been there since the beginning, Louis.

And now, is that changing the way your firm is growing? Do you see that the JOBS Act is going to further expand your firm? And obviously. evolving into this other ecosystem we have, which is the broker-dealers and combining them together.

Yeah, yeah. And I think, you know, the biggest thing for me and something that I've already started focusing on is trying to build an ecosystem of entities that I trust to work with and that I know I can refer our clients to and know that they're going to be taken care of and that the people they're working with are doing things the right way. Right. Yes.

And yeah, I think that. Working together and building that ecosystem and, you know, just making sure that people are aware of what they can and can't do and doing things right is. And obviously, as David gets more done in the future, hopefully our firm will continue to grow because we really service. We really pride ourselves in servicing those small, medium micro companies.

Um, and because they, they, they listen, right. They really trust us. They, they put their company, their ideas in our hands and, and really, uh, and their money, right.

Because these people are sometimes putting up their life savings in order to try and get their idea off the ground. Um, so keeping that in mind when you're helping someone plan your business, you know, these are all things that, um, that I'm, I'm focusing on doing. That's great. And thank you both.

I mean it. Yeah. Thank you, Mitch.

Thank you, Oscar. Yeah, absolutely. Great, great session.

And, and, and hope to do one again soon with the both of you. Oh, we will, we will. And look for everyone else, the today is the start of the journey for anybody looking and becoming either a registered funding platform, whether you are a broker dealer or not. I mean, the, the, the exercises, you got two great experts here that been there.

have done that more importantly been there and done that i think that goes a long way in today's world uh why because you're dealing with uh regulators and you're dealing with very active regulators i think mitch said it best today i mean he's got so many great quotes i'm i'm going to use them all and of course with your permission is that you know today when you have an active regulator both regulators extremely active why would you want to agitate them with your business, right? You don't. So it's always best to operate with the flag post of, I'm going to follow the rules. And by following them, you can still make money, be productive, help your clients. Certain little things don't need to stand in the way.

I often find sometimes people take a little anthill and make it into a mound. You don't need to. That was the whole reason for the JOBS Act.

The JOBS Act. remove the barrier and here we are today. And I want to thank Mitch and Patrick and for everyone else, thank you so much for staying with us this afternoon in the journey of the rise, how the print or broker dealers, the intermediaries can take advantage of this new emerging element that's happening within the private capital market.

Till tomorrow at the same time, 4 p.m. Eastern, we will see you with our great panels and moderator. Thank you everyone for coming out this afternoon. Enjoy. Thank you.

Thank you.