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What were they thinking…

28 Mar

First, I must apologize for the dearth of information on the public markets and financing techniques therein over the last four months coming from our BLOG.  Our associated group of organizations (Rhodes Holdings LLC, ReCap Marketing & Consulting LP, and American Equity Fund LLC) have been involved in a number of actions to protect shareholder value as well as having been asked to put together a number of “go public” projects for clients.  With that said, expect a new focus on providing a look into what is going in the public markets…

OTC Markets

Since the Jumpstart Our Business Startups Act (“J.O.B.S.“) Act was signed into law on April 5, 2012, there has been a “promise” in the air that it would help get capital formation for the micro-cap market started again.  This really hasn’t happened since the Congress and President can’t seem to get their acts together (pun intended), and the Securities & Exchange Commission (“SEC“) hasn’t released the details on how it will enforce the J.O.B.S. Act provisions, like changes to internet marketing of stocks (general solicitation).

OTC Markets Group Inc. had hoped that this Act would help drive their business, but alas FINRA is all about limiting the markets that OTC Markets Group Inc. serves by making it impossible to deposit shares in Pink Sheet companies as well as OTC:BB companies.  The crux of the problem that those of us working in the

Seal of the U.S. Securities and Exchange Commi...

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

micro-cap arena are facing is that even if you follow all the rules (register your shares, pay cash for stock, etc.), the broker dealers and their compliance departments are running scared of the SEC and FINRA’s rules, so stock just doesn’t get sold.  If no stock gets sold, that capital doesn’t get re-invested into other micro-cap stocks – thus, the velocity of money associated with micro-caps has ground to a halt.  Read what OTC Markets Group Inc. has to say:

In a few cases, it has eased regulation and shown that at least some of those in Congress listened.  The J.O.B.S. Act did make it so that issuers did not have start filing SEC mandated disclosure statements (10Q, 10K, 8K, etc.) until they reach 2,000 shareholders – previously it was 500 shareholders triggered filing requirements.  Read CFO magazine‘s article on banks de-registering:

All in all, the J.O.B.S. Act has not helped us reach its stated goal – helping jump start capital formation.  It may still help, but those of you who thought that crowd funding was going to take over capital formation, it hasn’t delivered the goods.

Accredited Investors

The J.O.B.S. Act did make some changes to the accredited investor definition, which would be very helpful.  The original 1933 Act definition is as follows for Rule 501 definitions.  Here is what the General Counsel of Second Markets had to say about the proposed implementation in his letter to the SEC.  In general, we at Rhodes Holdings LLC are keeping track of what is happening in the marketplace that will make it easier for our clients to access the capital they need.  Here are some websites associated:

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