Full text of speech delivered by Freeman White to those assembled for the Senate Summit on Equity Crowdfunding on July 13th, 2012:
Thank you all for taking the time to be here this morning. Thank you especially to Senator Brown and his staff as well as Senator Bennet and his staff for convening us all here today. We are honored to join you in discussing the important matters before us.
We would like to start by acknowledging that all of us want to get this right. I take your attendance here as an affront to any cynic who says that crowdfunding can’t be well regulated or that it will take too long to figure it out. Together we will figure it out, that is why we are here today.
The reason we wanted this meeting to happen was so that we could examine the intent of the law and, through discussion, propose robust solutions that will clarify the law and make it work. I would like to start with a sentiment I believe elucidates the soul of the Securities Act.
This is the Fortune Magazine from August 1933, originally sold for one dollar per copy and ten dollars per year. This issue covered the passage of the Act that had come in May just a few months prior. This piece is a [reading from copy of the magazine], “A discussion of the origins of the Act and its anticipated social and financial effects by an eminent consultant for the House Committee on Interstate and Foreign Commerce which drafted it.” by “Mr. Felix Frankfurter, the distinguished professor of the Harvard Law School”. Franfurter quotes then-President Franklin Delano Roosevelt, saying,
In his message of March 29, 1933, the President gave authoritative expression to views which the nation had learned through the bitterest of experience and which, at least in the abstract, not one dared to challenge. ‘There is…an obligation upon us [the President told Congress] to insist that every issue of new securities to be sold in interstate commerce shall be accompanied by full publicity and information, and that no essentially important element attending the issue shall be concealed from the buying public.
Frankfurter elaborates, “To compel the light now demanded by the Securities Act in places often consciously darkened is merely to require the elementary basis for knowledge before asking people to invest savings upon which so extensively depends the quality of men’s lives.” And, a little further on, “By compelling full publicity of ‘every essentially important element attending the issue of new securities” so that the public may have an opportunity to understand what it buys, the Act seeks to promote standards of competence and candor in dealing with the public. It deliberately aims against dormant high-pressure techniques…”
That is crowdfunding. Crowdfunding is by definition an endorsement of those founding principles of the Securities Act. The SEC and FINRA once were also startups and these were some of their founding beliefs. These are also foundational beliefs of the crowdfunding industry. In this respect I believe we are all working together towards the same common goal.
Today we have the opportunity to take very practical steps towards our shared goal. To that end, I would like to make sure we address at least the following three topics:
1) Advertising and Publicity
2) Investment Advice
3) Reps and Warranties
If we have time, I would hope we can also consider the matter of registration requirements for “Funding Portals” and how to make these as straightforward as possible and proportionate to their scope and role.
With each of these topics, our interest is in making sure the legislative intent is expressed clearly by the experts from the Senate staff so that this intent can be expressed in the eventual rules from both the SEC and FINRA. We look forward to further questions.