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Information Management forum asks if new Reg A is worth the hype: Panel of experts answers with an optimistic “Yes”

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Information Management forum asks if new Reg A is worth the hype: Panel of experts answers with an optimistic “Yes”

By: Steve Sadler, CEO, Allegiancy

July 07, 2015

I recently spoke on a lively panel at the Information Management Network Non-Traded REIT & Retail Alternative Investment Symposium in New York about the potential of the new Regulation A.

The Back Story

As part of the 2012 Jumpstart our Business Startups (JOBS) Act, the U.S. Securities and Exchange Commission (SEC) announced the new rules for Regulation A in March. The rules increased the amount a company can raise through a public securities offering from $5 million to $50 million in a year, and allowed non-accredited investors to invest.

What was the word?

Overall, our panel responded positively to the question posed about the potential of the new Reg A. Our moderator, Tom Voekler, managing partner at Kaplan Voekler Cunningham & Frank, said it well: “Amidst all the uncertainty, we have great optimism about the new Reg A.”

Attorney Michael Choate, partner at Proskauer Rose, acknowledged, “Uncertainty does exist around the new rules. Two states have already filed complaints, and many people are holding back, waiting to see.”

Our perspective at Allegiancy is that all of the uncertainty about the new Reg A will get worked out. But business has to take action to use the new rules in order for that to happen.

We at Allegiancy intend to move forward: building our business, doing things the right way, and taking care of our investors. Someone may come along and change things later, and we’ll revise accordingly. But entrepreneurs cannot wait until everything is perfect to move forward.

Other key points

The panelists agreed that the gist of the new Reg A is the democratization of capital – giving smaller companies the ability to raise more money, and letting anyone invest without having to prove they are an accredited investor (worth more than $1 million).

Joseph Stecher with Real Connex, an investment networking website, pointed out that there are other key change agents at work: The new Reg A obviously opens up of the potential for greater capital fundraising and investing. But the other agent is technology: People can now invest online with much less hassle, and they’re doing it. While that may not be what a 50-year-old wants to do, a 30-year-old expects it.

We talked about that a key benefit of Reg A is that anyone can invest – without having to deal with all the paperwork, costs, and hassles of dealing with each state regulator and none of the accredited investor issues that come with a Reg D private placement.

So I believe that with Reg A offerings, we, along with our attorneys, have to be careful that we don’t layer back in all the headaches of traditional offerings. If new issuers are so conservative that they use the belt-and-suspenders approach on everything, Reg A will lose much of its value.

No pain, no gain?

Some of the attorneys on the panel mentioned the risk and liability of sponsoring a new Reg A offering.

My response was that I’m not overly concerned about that because most people understand that there is risk in any investment. As long as we as sponsors take proper care of our investors and treat them with respect, real people in the real world understand risk.

I think Reg A offerings will start slowly, but that the path will quickly become clear enough and well-used enough that offerings will be very efficient and streamlined. I am convinced that Reg A can make a big difference for growing companies and Main Street businesses. Congress and the SEC got it right this time: Reg A is a great tool. Now we need to get out there and use it properly!

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PLEASE NOTE:

The foregoing does not constitute an offer to sell or a solicitation of an offer to buy securities, and no money or other consideration is being solicited hereby, nor will be accepted. An offer to purchase or a solicitation of an offer to buy the securities can only be made or received and accepted once an offering statement is qualified by the Securities and Exchange Commission as exempt from the registration requirements of the Securities Act of 1933 (the “Act”), as amended, pursuant to Section 3(b)(2) of the Act.   Any such offer to purchase securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date of the offering related thereto, and any indication of interest to purchase securities involves no obligation or commitment of any kind.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Allegiancy, LLC’s (the “Company”) present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the offering circular dated January 14, 2014, and filed by the Company with the U.S. Securities and Exchange Commission on January 15, 2014.  The offering circular, and any supplements or updates thereto, is available on the EDGAR system located on www.sec.gov.

 

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