Capital markets insights

The UK crowdfunding rules are governed by the FCA (Financial Conduct Authority). However the UK Crowdfunding Association (UKCFA) has come up with a code of practice that is worth noting.

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The world’s biggest banks and technology firms are set to converge on Madrid, Spain June 21-22 for MoneyConf, and Katipult will be among the exclusive group of companies selected to exhibit at the prestigious Fintech event that helped elevate companies like Stripe in previous years.

Maritime Properties is a licensed real estate brokerage that has been committed to helping it's customers buy, sell and invest in real estate for for almost 2 decades.

Toronto, ON – March 31, 2016 – VersaPay Corporation (TSXV: VPY) ("VersaPay" or the "Company"), a leading provider of cloud-based payment and accounts receivable management solutions, today announced that it has signed a partnership agreement with Katipult Software to bring a disruptive Crowdfunding solution for investment firms in the Canadian market. VersaPay’s gateway technology enables Katipult to provide customers using its crowdfunding software product with an integrated secure payment capability.

• The Canadian company Katipult launches its white-labelled crowdfunding software in the UK.

While the regulatory frameworks and rules for investment crowdfunding with accredited investors and non-accredited investors vary from country to country, there are four key considerations for bringing an online investment platform to market.

Depending on the platform structure and area of operation, the themes below highlight the considerations when dealing with security commissions and regulatory authorities.

General Partner vs. Intermediary models

The real estate marketplace model is what we define as the intermediary model, where the platform owner and the companies raising capital are independent. While the platform may screen issuers and deals for quality, the deals are still managed by third party issuers. The business model is usually transaction success fee driven, which in most countries requires some type of financial license. The other option is the General Partner model where the platform is being used to market proprietary deals online, using a management fee + % of profits business model. The General Partner model is the easiest as a starting point in most regions as firms are typically shifting their offline activities online and leveraging the same compliant processes.

Solicitation vs. Non-Solicitation

The solicitation ability will be a game changer in the long term, particularly with Title III rules in May 16th 2016,  which include non-accredited investors. It is great to see frameworks in place for accredited investor solicitation in a number of influential countries as a starting point. Many groups will be more comfortable in the short term launching a non-solicitation platform. This is  because it’s  in line with their current investor onboarding methods without “generally” soliciting, such as  scheduling web conferences/phone calls/face-to-face meetings with new investors that have been referred, introduced, etc. Under this scenario, the investment platform is acting as an investor relations tool for efficiencies and a better investor experience. General solicitation can always be used at a later date for permitted marketing strategies.

Debt vs. Equity

Debt based platforms often sidestep stricter securities laws regarding equity. Starting with debt deals rather than equity,  and evolving the platform for equity deals in the future is a possibility. Understanding the differences in compliance related to the two instruments may create a feasible roadmap for the business.

Domestic vs. Foreign Investors

Regulatory bodies in most countries are focused on protecting domestic investors than foreign investors. Whether your focus is high net worth individuals or institutional firms, dealing with foreign investors may open up additional possibilities or liabilities.  Thus, it is  important to grasp the implications of both focus to navigate the best go to market strategy.

Under every scenario, enlist the services of an experienced securities lawyer in your region to create a go-to-market strategy for your platform that is fully compliant.

Article also appeared on timesrealtynews.com:

http://timesrealtynews.com/top-4-considerations-for-launching-an-online-investment-platform-for-real-estate/

The Title III provisions were described by Forbes Magazine as the democratization of investing. Mark Roderick, a leading Crowdfunding attorney wrote, 'Title III Crowdfunding is like nothing seen before in the U.S. securities industry.' Through Crowdfunding non- accredited investors (making under $200,000 in income and less than $1 million in net worth excluding their primary residence) can invest in anything from a start up company to real estate. Investments that in the past have been available primarily to the accredited investor (making over $200,000 in income with more than $1 million in assets net primary residence).

We have all heard the term caveat emptor, Latin for let the buyer beware. All securities offerings come with lengthy legal jargon essentially informing the investor that past returns are no guarantee of future earnings. These rules, however, do not protect the investor from potential fraud.  The first prosecution of a fraud case involving crowdfunding was filed by the SEC in the US District Court of Nevada. The company in question had used several crowdfunding platforms to raise money under the Title II rules of the JOBS Act. The complaint alleges that only a small percentage of the money raised went into the stated investment and was instead funnelled into 'expenses'. So what is a potential investor to do?  The answer is due diligence and investing in platforms backed by real property.