Category: JOBS Act

Improving Legal Documents In Crowdfunding: Internal Rate Of Return

On By crowdfundattnyIn Crowdfunding, JOBS Act, Legal DocumentsLeave a comment

Internal rate of return, a financial concept, is not always used correctly in Crowdfunding documents.

The internal rate of return, often referred to as IRR, calculates the total rate of return of an investment, expressed as a percentage. Suppose you invested $100 in a bond that paid $5 at the end of each year for four years and were redeemed at the end of the fifth year for $105. Not surprisingly, that investment has an IRR of 5%.

Suppose you try to calculate IRR at the end of the fourth year? You tell Microsoft Excel that you paid $100 and have received $5 per year for four years and Excel says your IRR is minus 43.25%, i.e., you’ve made a terrible investment. What went wrong?

What went wrong is that you didn’t give Excel all the information it needs. It’s like the George Carlin joke, when he plays a sportscaster and announces “Here’s a partial score: Yankees 3.”

To get the right answer for IRR at the end of the fourth year, you have to tell Excel that the bond is still worth $100. When you do that, Excel calculates that your IRR is 5%.

And so it is in Crowdfunding. Often, the sponsor promises that upon any “capital transaction” – a sale or a refinancing, typically – the investors receive an IRR of X% before the sponsor receives his “promote.” Typical language:

The net proceeds of a Capital Transaction shall be distributed first to Investors, until they have received an internal rate of return of 8%, and then 70% to Investors and 30% to Sponsor.

But that’s like “Yankees 3.” It works if the Capital Transaction was a sale of the entire business, but it doesn’t work if the Capital Transaction was anything else, like a refinancing or a sale of only part of the business. With this language the investors are going to receive a complete return of their investment even if only a portion of the project has been sold, which might not be what the parties intended.

To get the right result you need to say something like this:

The net proceeds of a Capital Transaction shall be distributed first to Investors, until they have received an internal rate of return of 8%, and then 70% to Investors and 30% to Sponsor. If the Capital Transaction does not consist of the sale of all of the Company’s property and the distribution of all of the net proceeds to the Members, then the internal rate of return shall be calculated by (i) assigning to the remaining assets of the Company a value determined in good faith by the Manager, and (ii) assuming a residual value to the Investors equal to the amount they would receive if all such remaining assets were sold for such value and distributed in a Capital Transaction.

As for a definition of internal rate of return:

The term “internal rate of return” means the internal rate of return calculated using the XIRR function in Microsoft Excel.

Questions? Let me know.

New Domain Extensions Become Available

On By crowdfundattnyIn Crowdfunding, Domains, JOBS Act, SEC, Securities Exchange CommissionLeave a comment

Crowdfunding Image - XXXL - iStock_000037694192XXXLargeWe started with .COM. Then .NET, .EDU, .INFO, .ORG, and a handful of others. But we’re about to be flooded with new domain extensions, more than a thousand of them.

In the world of finance, we’re going to have .BANK, .BROKER, .CAPITAL, .FUND, .INVESTMENTS, and .FINANCE. In the world of food we’re about to have .FOOD, .EAT, .GROCERY and .KITCHEN. You get the idea.

The flood of new extensions offers opportunity and challenge. Maybe the .FUND extension would work great for your new Crowdfunding portal. On the other hand, maybe you’re already using portal.com and now you have to worry about a competitor using portal.fund (Hint: a different domain extension doesn’t give a competitor the right to violate your trademark).

Some of the new extensions are already available, while the rest are coming soon. For a complete list and to register, go to a registrar website such as http://www.Godaddy.com.

Questions? Let me know.

Rebuilding America, By Jason Fritton, Founder & CEO Of Patch Of Land

On By crowdfundattnyIn Crowdfunding, Crowdfunding Portals, Guest Blog, JOBS Act, Portals, Real Estate, UncategorizedLeave a comment

Statue of Lib CF_PurchasedBy: Jason Fritton, Founder & CEO of Patch of Land

Our headquarters is in Los Angeles, but Patch of Land was really born in Chicago.

Like all American cities, Chicago is a tale of two cities: one where the streets are lined with mansions, tidy row homes, and plush high-rises; and the other where most houses, if you can call them that, have boarded up windows, loose bricks, and rotting wood.

You can’t see those neighborhoods without wanting to help, and if you’re a real estate entrepreneur, as I am, you think there must be a lot of money to be made from all those vacant and abandoned buildings.

I went to foreclosure auctions but found that the market was broken. On one hand, the same handful of ultra-wealthy individuals or companies bid on $10 million properties. On the other hand, nobody bid on the smaller properties in blighted neighborhoods even though they could be had for a pittance, $10,000 or $20,000 apiece. The problem was (and is) that banks wouldn’t touch them, even if the developer had a proven track record. So the properties stayed vacant and abandoned, basically worthless, eyesores in the community.

I had a great idea – Crowdfunding! I’d ask for money from everyone. Not just as charity, although revitalizing neighborhoods would be the goal, but also as good investments for the donors/investors. We would start in Chicago and then move across the country, helping communities along the way.

We had our motto – Building Wealth & Growing Communities – before we knew how we were going to do it.

As it turned out I was a little early. I wanted to advertise my investments to everyone but in securities law terms that would have been “general solicitation,” which was still illegal. To keep my idea alive I found myself in Washington, D.C. lobbying for the JOBS Act, where I learned how political compromise can work. Republicans liked the economic freedom the bill gave to entrepreneurs and individual investors, while Democrats liked the potential for improving neighborhoods and the boost for small business.

Both sides came together and President Obama signed the bill into law on April 5, 2012. Now, without going to jail, I could start improving those neighborhoods.

There is an old African proverb: “If you want to go quickly, go alone.  If you want to go far, go together.” I started building my team piece by piece, knowing a lot of other smart people were getting into the market at the same time. And I’m proud of the team I built, the best in the business as far as I’m concerned. We did our first deal on October 15, 2013 and within six were the leading platform in the country dedicated to real estate debt.

We pre-fund all our deals, meaning we invest our own money before asking for money from anyone else. Unlike some other platforms, we also start paying interest as soon as we take an investor’s money. We are completely transparent. We charge no fees to investors. We offer very fast turnarounds to borrowers and very competitive returns to investors. We do a great job evaluating loans, based on our credit experience to date. We’ve taken big steps toward bridging the gap between the old world of behind-closed-doors capital formation, and the new world of online transparent capital structures.

But they’re just first steps. We and the industry have a long way to go. More than anything, we need a workable Title III or its equivalent. Accredited investors, all eight and a half million of them, make up only a small fraction of American adults. To truly democratize the formation of capital, we need to let everyone into the game.

Less than a year after Title II came into effect the market is exploding, with some very large real estate players getting into the business. To me, that’s just vindication of our business model, proof that the Crowdfunding business is being taken seriously.

I don’t worry much about the competition from those companies because small, nimble companies like Patch of Land enjoy a bunch of advantages:

  • Crowdfunding is a new business. Those of us who have been here from the start know the business inside out.
  • There’s a reason Walmart can’t seriously challenge Amazon. Amazon’s business was built online from the ground up, while Walmart’s entire model, entire way of thinking, is based on bricks and mortar. For more on that, click here.
  • Our business runs on technology, and our technology is second to none. In one seamless, integrated process, we control a project from application to interest-paying loan.
  • Our cost structure is far lower, allowing us to share the savings with both borrowers and investors.
  • There are wide swaths of the American real estate market the big players have never touched and will never touch. We call that market “under-served” or “most of America.” That’s the market Crowdfunding was created to address.

Among the many transactions we’ve complete, our loan to Deborah Smith in Georgia shows what we’re about. Deborah developed a rent-to-own program where veterans with poor credit could qualify for financing from the Veterans’ Administration. Using financing from Patch of Land, she was able to get those veterans in homes they couldn’t afford otherwise. And our investors made money in the propatch of landcess. That’s a long way from solving every problem in the real estate market, but it’s a start.

I’m super optimistic about the future of Patch of Land. If you had told me five years ago that I could be doing what I’m doing today, I’d have thought you were dreaming. Wait until you see what we’ve built five years from now.

Follow Jason Fritton on Twitter: @JasonFritton

Follow Patch of Land on Twitter: @PatchOfLand

 

The Next Big Thing In Crowdfunding: Pooled Assets

On By crowdfundattnyIn Crowdfunding, Entrepreneurs, Investing, JOBS Act, SEC, Title II CrowdfundingLeave a comment

September 23rd marks the first anniversary of Title II Crowdfunding. The number of portals has grown exponentially but most or all portals continue to offer investments in single deals, e.g., an apartment building in Austin. Before long, I believe the market will shift to investments in pools of assets. Rather than the single apartment building in Austin, a portal will list a pool of 20 apartment buildings in the Southwest.

Accredited or not, very few individual investors have the knowledge or experience to invest in individual deals. And based on the stock market, most individual investors don’t want to. Individuals have historically preferred mutual funds over individual stocks; a mutual fund is just a form of pooled assets.

An investor can create his own pool, investing $5,000 in each of 20 apartment buildings rather than $100,000 in a single property. On Prosper or Lending Club, I bet most investors participate in multiple loans.

But that doesn’t give consumers quite what they want. What they want is a fund manager, someone who will choose the 20 apartment buildings and also decide when to sell them. A stock market investor who wanted to creat her own pool could buy 20 individual stocks, but instead she buys a mutual fund.

Do Crowdfunding investors view the portals themselves as mutual funds? Maybe investors expect Fundrise, Patch of Land, Wealth Migrate, or iFunding to play the role of the mutual fund manager, selecting only deals worthy of investment. On the advice of counsel, every portal tries hard to disclaim that legal responsibility, but maybe investors ignore the disclaimers, looking for a “brand” for investing.

I certainly expect portals to start offering asset pools. I’ll go out on a limb and say the first portal offering curated pools will have a great competitive advantage, and I’ll go further and say that Crowdfunding won’t reach its potential until pooled asset investments are widely available.

Pooling assets makes things a bit more complicated and a bit more expensive: more legal rules come into play; you have to think harder about giving investors liquidity; and, most important, you have to pay someone to make investment decisions and take the legal risk. But that’s where the market is headed.

Questions? Let me know.

What Can I Show On My Site, To Whom, And When?

On By crowdfundattnyIn AngelList, FundersClub, Investing, Investor, JOBS Act, Rule 506(b), Rule 506(c), SECLeave a comment

The SEC no-action letters issued to FundersClub and AngelList early in 2013 created some confusion around the deal-specific information that can be shown to prospective investors. Let’s try to clear that up.

Rule 506(b) Deals

You cannot show your Rule 506(b) deals to just anyone browsing the Internet, because that would be “general solicitation and advertising,” which is permitted under Rule 506(c) but still prohibited under Rule 506(b). If you’re a real estate portal, you can say “We have great real estate deals on our site,” but you can’t say “Look at this multi-family rental project in Austin.”

Both FundersClub and AngelList hid their deals behind a firewall. A user couldn’t see the deals until he registered at the site and promised he was accredited. In the 2013 no-action letters the SEC approved this arrangement, sort of.

I say “sort of” for three reasons:

  • The two no-action letters weren’t actually about registering users. They were about whether FundersClub and AngelList had to register as broker-dealers. Nowhere do the no-action letters say “We agree that, because you hide your deals behind firewalls, you’re not engaged in prohibited general solicitation and advertising.”
  • The no-action letters were issued by the Division of Trading and Markets within the SEC, not the Division of Corporation Finance. Typically, the Division of Corporation Finance would deal with so-called “exempt offerings” (offerings that are exempt from the general registration requirements of the Securities Act of 1933), of which general solicitation is a part.
  • Most intriguingly, the no-action letters aren’t exactly consistent with prior SEC rulings dealing with the online solicitation of customers, specifically the IPONET rulings in 2000. Those rulings assumed that the person doing the online solicitation was a registered broker-dealer; by definition, FundersClub and AngelList were not broker-dealers.

As a result, we can’t be 100% certain that the SEC, if asked point blank, would approve those arrangements from the perspective of general solicitation and advertising.

Nevertheless, the no-action letters were issued and the Crowdfunding industry has adopted the FundersClub and AngelList model: if you’re doing Rule 506(b) deals, you put the actual deals behind a registration firewall.

Once an investor registers at your site he can see the deals, but he can’t invest in them. In a series of no-action letters issued long before the JOBS Act, the SEC established that once an investor has become a customer, he has to wait before investing – the so-called “cooling off period.”

Some sites today are using a 21 day cooling off period, presumably because Title III incorporates a 21 day cooling off period. But the Title III rule is irrelevant to Rule 506(b). Thirty days is probably better, although, again, the notion of a cooling off period comes from SEC rulings, not a statute.

One more twist: at the end of the cooling off period, your investor can invest only in new deals, not deals that were on the site when he registered.

Rule 506(c) Deals

Rule 506(c) is far simpler. If you are doing only Rule 506(c) deals, you can show anything to anyone anytime.

Using Rule 506(c), you can show every detail of every deal to every casual viewer, even before the viewer has registered at your site. If you think that’s a bad idea from a marketing perspective or because you’re trying to protect confidential information, no problem. You don’t have to show all the details on your home page, but you can.

You can also make users register before they can see deals, just like Rule 506(b). If you take that route, you can ask users whether they’re accredited when they register, as you would under Rule 506(b), but you don’t have to ask. You can let everyone see the deals, accredited and non-accredited alike.

If you ask whether users are accredited – because you think it’s a good idea from a marketing perspective – that doesn’t mean you have to stop non-accredited investors at the door. Non-accredited investors can see the deals, too. Maybe they’ll tell their accredited friends.

Suppose a user tells you she’s accredited when she registers. Can you take her word for it? At that point in the process, absolutely! We don’t want to spend money or time on verification yet, and we don’t want to create transactional friction where we don’t have to.

With Rule 506(c), there is only one critical moment: when your investor is ready to write a check. At that point you must verify that she’s accredited, not merely by asking her but by looking at her tax returns, or getting a letter from her lawyer, or, most likely, having her verified by a third party service like VerifyInvestors or Crowdentials.

There’s no cooling off period with Rule 506(c), either. Your investors can see all the deals and invest right away.

Have I mentioned before that Rule 506(c) is better for Crowdfunding?

Questions? Let me know.

Update On Accredited Investor Definition

On By crowdfundattnyIn Accredited Investor, Crowdfunding, Investor, JOBS Act, SEC, UncategorizedLeave a comment

I wrote to my close friend Mary Jo White, the Chair of the SEC, urging that the SEC expand, rather than restrict, the definition of accredited investor. My letter is here.

SEC letter_Roderick

Questions? Let me know.

Carriages, Cars, And Policeman – By Scott Picken, Senior Managing Partner of Wealth Migrate

On By crowdfundattnyIn Crowdfunding, Investing, JOBS Act, Real Estate, UncategorizedLeave a comment

WM ScottBy: Scott Picken, Founder & Senior Managing Partner of Wealth Migrate.

I’m Scott Picken, the founder and Senior Managing Partner of Wealth Migrate. Our investment committee has collectively 227 years of experience in international real estate. We have facilitated 10,779 investments to a value of over $1.3 billion and invested on five continents. We’re passionate about Crowdfunding as an enabler of our current business, helping to make everything more efficient, accessible, and transparent.

When I spoke at the Coastal Shows event in New York City at the end of June, many of those speaking and attending seemed to believe that Crowdfunding was invented in America in 2012. Far from it! In Australia and elsewhere around the globe, companies have been Crowdfunding for years. At this moment I’m returning from a Crowdfunding conference in Singapore, which was conservatively speaking 10 times the size of the New York City event.

Why invest globally? Because real estate markets do not all move in synch. When the U.S. market was plummeting in 2007-8, the Australian market was doing quite well, actually growing on average by 8.6% in 2009. And if anyone hasn’t noticed, the U.S. dollar has lost about 72% of its value against other major currencies over the last 10 years. No one market, not even the U.S., can protect itself against that kind of loss.

It is just like in nature. When winter comes in the Northern hemisphere the birds fly south and when summer returns they fly north. Migration is a law of nature, and yet we humans remain firmly planted in one place, winter and summer. It is why we called our company Wealth Migrate, as in the 21st century it is about finding the safest and best returns, globally.

Robert Kiyosaki, the author of Conspiracy of the Rich and Jim Rogers in Street Smarts, both teach that the easiest way to get rich is to follow long-term trends. If the globalization of the international economy is not a long-term trend, then I don’t know a long-term trend.

Actually, globalization is not enough – just try selling American cheeseburgers in China. At Wealth Migrate we believe in glocalization, which means thinking globally and acting locally. McDonald’s modifies its menu to fit local tastes and we find best-of-breed partners on the ground in local markets and then partner with them. A bird in a flock can fly 70% further than a bird flying on its own.

Read my book, Property Going Global. It’s all about successful investing in foreign markets.

When I read Ben Miller’s post about the problems he faced with his first Crowdfunding offering, I knew exactly what he was talking about. You can’t imagine how many accountants and lawyers told us “No!” when we started to look at the U.S. investor market and the opportunities in the US. With everyone using the Internet for everything, with Twitter literally driving the Arab Spring, the investment world needed to change from horse-drawn carriages to automobiles and these “experts” were like policemen not giving us a license to drive a car. It just about drove me crazy but fortunately not so crazy that I gave up.

In 1998 I wrote a dissertation about the real estate market and the coming IT revolution. My synopsis said “taking an old industry, steeped in tradition and run by many smaller, disparate and often inefficient operators, and redefining it through the use of web technology to increase global reach, partnerships and efficiencies of scale, so as to provide a ‘one stop’ enhanced and personalized service to our clients.” I didn’t realize then that I was talking about Crowdfunding, the real estate finance market, and Wealth Migrate, but that sums up our business model pretty well.

Look, almost 50% of the world’s wealth is held in real estate yet only a small fraction of the world’s population (12.9%) owns real estate, much less has access to great deals. I am a firm believer in the business philosophy of Zig Ziglar that “You can have anything you want in life if you help enough other people get what they want.” The Afrikaans say “Ver van jou goed, na aan jou skade,” which loosely translated means “Keep your assets close to home, if you don’t want to lose them.” But in the 21st century that is no longer true. To give millions of individuals what they want, we need to look beyond our own homes, even beyond our own national borders, and ultimately help create global wealth for all.

In my opinion it’s a great time for cars, not a great time for carriages or outdated policemen, but the cars do need to be driven safely. It is all about trust, transparency and most importantly everyone’s interests being aligned. You are no longer bound to a country, a currency, an economy or even an asset class. I believe it is less about where you live and more important about where you wealth lives.

 

Title III And The Evolution Of Business Law

On By crowdfundattnyIn Crowdfunding, Entrepreneurs, JOBS Act, SECLeave a comment

I’m not optimistic about Title III for the usual reason:  I think the cost of complying with the statute will prove too high. I’ve even proposed my own fix to the statute. But there are plenty of smart people who think otherwise, including Ron Miller of StartEngine, and ultimately opinions don’t matter. The market will decide whether Title III can work in its current form.

The SEC proposed regulations last October 23rd and the comment period ended long ago. Rather than wait for the statute to improve, I’m ready for the SEC to consider the comments, make changes to the proposed rules as it sees fit, finalize the regulations, and let the market do its job.

Whatever the defects of current Title III, and there are many, chances are they will be fixed over time. Time after time, almost from the beginning of time, the legal system has responded to the needs of the business community. Examples:

  • Hundreds of years ago, governments created corporations in direct response to the need of traders and investors to limit liability on foreign adventures.
  • With the advent of income taxes in the 20th century, business people had to choose between the limited liability of a corporation and the pass-thru tax treatment of a general partnership. But not for long. Soon legislatures created limited partnerships and S corporations, providing the best of both worlds.
  • When defects were discovered in limited partnerships and S corporation – for example, the risk that limited partners could face unlimited liability – legislators fixed them and fixed them until, lo and behold, Wyoming created an even better entity, the limited liability company we all know and use today (which, in turn, has already been improved).
  • Private placements have always been legal, regulated by the SEC through no-action letters and other guidance. But the private placement market needed clear rules. Hence, Regulation D in 1982. And now Title II of the JOBS Act has improved Regulation D by adding Rule 506(c).
  • Since I have been practicing law (less than a century) the corporate laws of most jurisdictions, including Delaware, have improved dramatically, as state legislatures respond to the needs of businesses large and small.

There are two things you never want to see being made:  sausage and law. But over time, commercial laws do change, usually for the better. If Wyoming can invent limited liability companies, surely we and our Federal government can improve Title III as the need becomes apparent.

So with malice toward none, with charity toward all, let’s stop debating whether Title III can work and let the market figure it out.

Questions? Let me know.

The Decision-Making Ability Of Crowds Vs. Experts: A Case Study

On By crowdfundattnyIn Crowdfunding, JOBS Act, KickstarterLeave a comment

Ethan Mollick of the Wharton School of the University of Pennsylvania and Ramana Nanda of the Harvard Business School collaborated recently on a Working Paper captioned Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts. The full Working Paper, which I recommend for everyone in the Crowdfunding space, academic or otherwise, is available here.

Professors Mollick and Nanda seek to compare the decisions of crowds with the evaluations of experts in a rigorous academic study.

Using data supplied by Kickstarter, the authors focus on campaigns involving theatrical projects, which
involve both a highly subjective judgment about artistic merit and a predictive judgment about commercial success. On one hand, the data from Kickstarter indicate which projects were funded by the crowd. On the other hand, the authors obtained evaluations from a panel of industry experts, in this case recognized theater critics. The authors were then able to compare the judgments of the crowd to the evaluations of the industry experts.

The results were illuminating:

  • There was a very high correlation between the judgment of the crowd and the evaluations of the experts. In this respect the study seems to strongly confirm the ability of crowds to make good decisions.
  • Where the crowd and the experts disagreed, the crowd tended to be more positive than the experts, i.e., the crowd funded projects that the experts would not have funded. Moreover, those projects turned out to be no less successful than projects approved by the experts. As the authors put it, “Overall, our findings suggest that the democratization of entry that is facilitated by Crowdfunding has the potential to lower the incidence of ‘false negatives.’”
  • Projects funded by the crowd tended to share certain characteristics, suggesting that “there is an ‘art’ to raising money from crowds.” According to the authors, “The crowds seem to place emphasis on, or extract information content from different attributes of the process than experts.”

I find this fascinating and instructive. For one thing, the finding that industry experts tend to be overly negative correlates with my own experience in the world of law and venture funding. More important, the study suggests that in a world where access to capital is controlled by experts the likelihood is that good projects will go unfunded.

That insight has enormous implications for the capital formation industry and the world economy. If more worthwhile projects are funded, with the accompanying economic growth, that is a strong justification for Crowdfunding. And if crowds tend to avoid false negatives, then it makes sense for the U.S. to adopt a robust Title III as soon as possible.

I want to thank Professors Mollick and Nanda for making me aware of this study and for their continuing work in this space. As this study illustrates, the academic world has important lessons for portals, lawyers, legislators, investors, and everyone else in Crowdfunding.

Questions? Let me know.

A Constructive Approach To Accredited Investor Definition

On By crowdfundattnyIn Accredited Investor, Crowdfunding, Dodd-Frank Act, JOBS Act, SECLeave a comment

crowdfunding_investorSection 413(b) of Title IV of the Dodd-Frank Act allows the SEC to evaluate the current definition of “accredited investor,” which has been in place since 1982, and to revisit the issue at four year intervals. As the SEC deliberates, alarm bells are sounding in the industry, warning that a new definition could destroy not only the nascent Crowdfunding industry but the entire ecosystem around private capital formation.

Though well-intended, these warnings are misguided, in my opinion.

If the SEC indexed the existing definition to the CPI over the last 32 years, leading to an income threshold of about $500,000 and a net worth threshold of about $2.5 million, the effect would indeed be devastating, with only star athletes and Google employees allowed to invest. However, I see no reason to believe the SEC has anything like that in mind, for several reasons:

  • The SEC could have changed the definition on its own initiative at any time over the last 32 years but hasn’t.
  • Not only has the SEC not changed the definition, it has never expressed any particular concern with Rule 506, where most private placements take place.
  • Most important, the Dodd-Frank Act instructs the SEC to modify the definition “as the Commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy.” In my own extensive but necessarily anecdotal experience, I have seen no evidence that the current income or net worth requirements fail to protect investors or, for that matter, that they are particularly relevant to protecting invesors. In the absence of widespread problems, there is simply no reason to make the definition more stringent than it is today and, given the Congressional mandate to keep one eye on the economy – that is, on the economic benefits of making capital available – there are probably stronger reasons to relax the current definition.

According to the Chairman of the SEC, Mary Jo White, the SEC is considering a more nuanced definition of accredited investor, one that takes into account not just income and net worth but also financial sophistication. That sounds right to me.

For now, the best way to help the SEC adopt a sensible definition of accredited investor is to provide real data. If you have reliable information about the incidence of fraud in private placements, for example, or about the correlation (or lack thereof) between financial sophistication and annual income, the SEC would love to see it. Feel free to send it to me and I will forward it.

In the meantime, don’t worry. . . .too much.

Questions? Let me know.