Use the Chapters list below to select the part of the video you want to watch.
Chapters:
- Reg A+ Rule Changes & Broker-Dealer Participation
- Broker-Dealers Are No Longer Needed for Texas and Florida!
- Using a Broker Brings FINRA Involvement…
- Brokers Add Cost and You Must Still Spend Big…
Special thanks to Ryan Ellenburg and Chris Werner for their comments on their experience working with Broker-Dealers:
"Facebook/Meta Pixels have certain requirements to enable tracking and surprisingly, most of the big boys in the industry do not support creating the infrastructure to facilitate this. What's even worse is that there doesn't seem to be an interest in supporting this. Rod, however, without even pushing back, saw the opportunity to improve on this and enabled his platform to incorporate all Pixel tracking, and his team even followed up to confirm sales were logged and tracked on the Meta Ads Manager. MSC provides top-shelf infrastructure along with boutique-level customer service." - Ryan Ellenburg, Capital Markets Associate, GolfSuites Reg A+
"At C3 Bullion, we found that our broker-dealer caused us significant problems with our Reg A+ offering. The broker-dealer was excessively restrictive in what it would allow us to say on the investment offering page and in our marketing. They placed numerous limits on how we could describe the investment, making our offering appear vanilla and dull compared to the reality of what we do. The broker told us they had no choice, that FINRA required them to limit what we could say. This significantly increased the cost of our marketing efforts. Now we know, from Manhattan Street Capital, that we don't need a broker-dealer. Wish we had known that 18 months ago!" - Chris Werner, CEO, C3 Bullion
"The way they (the broker-dealer) treated our marketing content was too restrictive. We always knew they wouldn't bring clients, but we never expected them to block our marketing efforts. Even the way they handled international clients was too much. They became our business prevention unit. Next time, I would NOT use a BD from the beginning. What I would do is start WITHOUT a broker dealer, build some momentum, raise some capital, and then decide if to add a BD or not, and if the decision was to partner with a BD, the decision needs to be based on the capabilities and business friendlines of the BD, the BD cannot become the business prevention unit of your business as it became to us." - Chris Werner, CEO, C3 Bullion
MSC is not a law firm, valuation service, underwriter, broker-dealer, or Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions.
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Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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The next section is an update on changes in Reg A+, related to broker-dealers. Broker-dealers have their place. Underwriters have a really wonderful place when you're doing an IPO, obviously. And broker-dealers have their place, too, no question about that. A big change in Reg A+, though, as it affects broker-dealers, is that three years ago, two years ago, it was a pain getting into Texas and Florida and a couple of other states, but Texas and Florida in particular. So, in theory, our clients could file with Texas and Florida as their own broker for their own offering and get permission and do the Reg A+, without having any broker-dealer involvement. But, it was slow and difficult and time-consuming, and Florida had a... they didn't like Reg A+, and they had a shortage of staff in their securities department.
So, it was a pain. That was the most cost-effective method. Most companies... It to add a broker dealer just to get into Texas and Florida and a few other states that made it difficult where you could still work with them and get through relatively easily.
Lots of people invest from Texas and Florida. So that was the case. And I have on my platform, on my company's platform, we've got FAQs talking about this issue and informing companies about the problem states and how to solve that problem.
Two things, two big things have changed, actually more than two, but the biggest ones are Texas has become much more proactive about stock offerings and stock exchanges.
They're enticing the NASDAQ and the NYSE to open exchanges in Texas. And I presume that's the reason they've made it easier now, where they still require you to file, but you can file immediately.
On the same day you file your Reg A Plus with the SEC, you can file that day and they'll typically get you approved within four weeks in Texas.
So that's become a beautiful, smooth journey. And Florida changed their regulations. Where you no longer need to get their permission and file as your own broker-dealer, you no longer need a broker-dealer to raise money in Florida, so you save an immense amount of money, you don't have to pay the FINRA fee on filing, where that's dependent on how much you're raising, I think it's a 1% fee, you don't have to pay that, you don't have to pay upfront fees to a broker-dealer, you don't have to pay commissions of 2%, 3%, 4% to broker-dealers that aren't raising money for you.
So, it's a part, I'm getting distracted by stuff being posted in the chat section, so now it's much easier to raise money in a REG A+, with no broker-dealer involvement, save the FINRA fee, save the broker fees and commissions, and more importantly, this isn't new, but it's significant, I want you guys to be aware that the problem with having a broker-dealer involved in a REG A+, is that they are regulated by FINRA, and FINRA is
Very slow bureaucracy and very restrictive on broker-dealer activities. the broker-dealers, depending on how they interpret the rules and depending on their relationship with FINRA, they place very tight restrictions on the marketing content, on your offering page for your REG A+, and on the email content that you can send out, and on the advertising content that you can send out.
Highly restrictive stuff, punitive in many cases. So, not only are you spending money, you're losing the ability to cost-effectively market your REG.
That's a huge issue. Huge. The other thing is that when you include in your REG A+, filing that you have a broker-dealer involved, then you make provisions for that, describe it, and so forth, as you would expect.
The SEC then, when they're ready, let's say they qualify you in two weeks, which is a lovely scenario when it happens.
Whatever time they qualify you, they will not actually qualify you until FINRA blesses your DEA. with the broker dealer.
And we've had situations where that stretched out for months and months, and the client finally gave up, cancelled the broker dealer arrangement, and lost out on the cash fees they'd already paid, removed the broker dealer references from their Reg A+, and then got qualified by the way once they made that refiling.
So my point here is that there are so many Reg A Pluses that get caught in jeopardy by having FINRA involved by dint of having a broker dealer involved, it costs months and months and months in many cases, in which case you're sitting on your hands waiting to raise money and, you know, not able to do so.
So those are serious reasons why not to use a broker dealer. Again, you know, I know a lot of great broker dealers and underwriters, good rapport with many of them, and like to work with them, etc.
But, you know, now you can do a Reg A Plus with my company and with other platforms without having to spend an heinous amount of money in commissions and fees.
Thank you much. Now, there's a couple of our companies that we know and work with who have posted, volunteered to give us feedback, which I posted in chat.
We have posted in chat. One is from a company called C3 Bullion, and the other is from GolfSuites, and I don't know if Ryan is on with us, but Ryan is the guy that runs marketing for GolfSuites.
They've done a number of Reg A+. They did their first one with us, and they came back to us to do their most recent one with us, having gone elsewhere for a while.
So they have very, he has very relevant experience. So I'm thinking the first of the two quotes is from Ryan.
Let me just check here. Yeah, so please make a note of that. We will be including those quotes in our blog post article when we send it out.
So you'll have access to it, to them there. Small print, difficult find. Okay, so now I'm opening up to questions on the broker-dealer topic, and in general on the whole webinar, and on Reg A+, and on Reg D for that matter.
I hope this has already been useful, but if you have questions, please do post them. And so you're aware, actually I'm going to go scroll back up and see if I'm missing questions that have already been posted.
Yeah, Carl is promoting his book there, yeah, talked about qualification, yeah. The biggest issue, really, with doing a Reg A+, is that it costs an arm and a leg to market an offering.
In most cases, if you don't have a gigantic audience of people that love your company, then the biggest expense in online capital formation is advertising outreach through typically Facebook, Instagram, and in some cases TikTok, because if you could get into TikTok...
It's the most efficient, the most cost efficient vehicle, they have the best AI. But, you know, that is the most expensive piece of everything.
If you have a broker dealer charging you 6, 8, 9, whatever, 6, 7, 8% commissions, you're still having to do all the advertising because in an online offering at Reg D or Reg A+, broker dealers will not raise the money for you until and unless it's already a successful offering.
Then is when they will kick in, but you have to bring in the first 10 or 20 million to make clear that it's a success.
Do so quickly, do so efficiently. Then is when engaging a broker dealer can make sense because that is when they'll take a risk and bring in their clients to invest.
Top management in a broker dealer may say, yeah, yeah, we love it, we'll do this. But the reps who work for the broker dealer do not want to put their client relationships at risk on an offering that is as yet unproven.
So they're not going to do the proving, we have to do the proving, we have to conduct the marketing together.
To make it successful.
THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH-TO-TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS.
