Dec 30, 2014 • 21M

#178: Crowdfunding Expert Ellenoff Comments On SEC Delays

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Read the full GoodCrowdinfo article and watch the interview here: Subscribe to this podcast on iTunes by clicking here: or on Stitcher by clicking here: Doug Ellenoff, Partner at Ellenoff Grossman & Schole, is a leading legal expert in the burgeoning field of investment crowdfunding. He recently sent an alert to clients warning them to be guard against “touting” violations that arise when compensation arrangements aren’t disclosed that the SEC now intends to pursue. The alert read, in part, “The SEC appears to be preparing to target investment platforms that post issuers’ securities without explicitly disclosing the compensation received from such issuers.” “We are concerned that a broad interpretation of Section 17(b) could be imposed on all online portals involved in the sale of securities, not limited to “posting sites”, but broker-dealer, investment advisory and investment management models as well,” the alert continued. The alert concluded with this specific recommendation: Recommended action: All platforms (regardless of whether you are posting only, have a broker-dealer relationship, or create special purpose vehicles) should include either a section in the terms of use or create a “Disclaimer” page for a description of platform compensation which is featured via a link within the offering materials. Further, any supplemental communications (e.g., email, circular or other publication) with potential investors regarding the sale of securities on behalf of issuers should include a similar link to the compensation disclosure. It is not sufficient to have a general link on the website footer alongside the link to terms of use or to provide generic disclosure. Operators of investment platforms should also avoiding referring to themselves as “independent” of issuers if they receive posting fees, since doing so may misrepresent the relationship between the two parties. Please consider whether a friend or colleague might benefit from this piece and, if so, share it.