Come One, Come All to the Securities and Exchange Commission’s FinHub!

A Securities Attorney’s Cautious Outlook

As you may have already learned, the SEC has created the new Strategic Hub for Innovation and Financial Technology to help startups and corporations using distributed ledger technology (DTL) develop out the regulatory frameworks. I believe the idea is so the capital markets do not collapse or, more importantly in the SEC’s eyes, so that the mom and pop investors do not get screwed over by a snake oil salesman in a shiny digital suit or whitepaper.

What does this mean for you and your company or those that you advise? That’s a great question and the answer, generally, is that we have no idea. We want this to be a great opportunity for the US to catch up with the rest of the world, especially our Canadian neighbors (who, by the way, recently have figured out recreational marijuana), and the likes of super aggressive competitor countries like Gibraltar, Estonia, Bermuda, and Malta. This all seems well and good, and I’m a huge fan of communication, as along as long as it goes both ways. What do I mean by this? Well, first and foremost, attorneys are expensive and, generally speaking, securities lawyers are a bit more hefty than regular attorneys because our bar license can be at risk. So this means, in reality, the world of the SEC’s sit-downs will be with high-priced companies and their lawyers that have the desire to create the world in their image. And, do not get me wrong, I’m a capitalist through and through, but I try to be a fair one. The idea behind blockchain and DTL is that there is trust and security between parties and, as we have seen thus far, the bigger, more powerful players have ruled the industry. If we have too many powerful players that limit this industry and create some of the old world regulatory hurdles that prevent non-accredited investors to take part in simple offerings with overly burdensome regulations and reporting requirements on the small issuer companies, this industry will go elsewhere. It will leave the US behind and it will force a lot of companies to take a serious look at whether or not they want to tackle the US regulatory system later; because, let’s face it: this is the US and it’s really nice to do business here.

That being said, I applaud the SEC for this innovative approach, but I hope that the small cap companies in this space take a moment to figure out what works best for them and their potential investors as the approach these regulatory bodies, especially without the proper counsel. There are sharks in these waters on all sides and we do not need bad law. None of us were around for prohibition, but as the Canadians have already figured out recreational marijuana on a national level, we are still arguing among ourselves and the federal government. We, as a country, need to be innovative before we are left behind in the next capital revolution but all parties, small cap included, should be a part of these discussions and subsequent advancements.

*Not an endorsement of recreational marijuana.

**Is an endorsement of limited regulations and/or those for the public good.

This answer is provided as a general informational service to clients and friends of Jonathan C. Dunsmoor, Esq. and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes. For inquiries regarding this matter or others please contact us at or 716-371-1936.

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