the renaissance of the retail investor white paper 48161

8/18/2019 The Renaissance of the Retail Investor White Paper 48161

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THE RENAISSANCEOF THE RETAILINVESTOR ANDITS MONUMENTALIMPACT ONMARKETPLACELENDING, EQUITIESCROWDFUNDING,AND THE U.S.RETIREMENTSYSTEM.

PRODUCED BYDARA ALBRIGHT, JAMES A. JONES, KIM WALESDARA ALBRIGHT MEDIA | IRA EXCHANGE | WALES CAPITAL


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The Renaissance of the Retail Investor and its Monumental Impact onMarketplace Lending, Equities Crowdfunding, and the U.S. Retirement System 1

The purpose of this white paper is to understandthe correlation between the investment opportunitygap and America’s increasing wealth disparity.This paper explores the constitutionality of the

accredited investor rule and discusses whether itshould be broadened to include more of the populaceor eradicated altogether. It also focuses on how anumber of legislative changes, occurring duringthe most prolic era for FinTech, will impact

retail investors, asset class ingenuity, nancial services,America’s economic landscape, and its retirementinfrastructure. This paper will further demonstratethe economic signicance of tax-deferred micro

alternative investing – made possible by technologicalachievement and a modern regulatory regime – andhow it will enable marketplace lending and equitiescrowdfunding platforms to scale.

Summary

Contents2 Overview

7 The JOBS Act

8 History and Precedent of theAccredited Investor Rule

10 Fair Investment Opportunitiesfor Professional Experts Act(H.R. 2187)

12 Constitutionality of theAccredited Investor RuleQuestioned

14 The Dire Consequences of aClass-based Investing System

15 The Great Conundrum: Howto Protect UnaccreditedInvestors While Expandingtheir Investing Freedoms

17 The Investing Landscapehas Changed

19 Crowdnance:

The Reconstitutionof the Capital Markets

23 Can Reg A+ Revive the SmallCap IPO?

24 Innovative Applications of RegA+ Beyond the Small Cap IPO

25 The Transformation ofFixed-Income Investing

28 Platforms that Support RetailAlternative Fixed-Income Investing

30 Employing FinTech to Thwart aLooming Retirement Crisis

32 Fintech Continues to Change

the Rules

33 The existing antiquated process

35 Hi-tech retirement solutions fora new FinTech driven industry

36 How the Modern SDIRA willImpact Financial Services

38 The $14 Trillion Opportunity forCrowdnance Platforms

39 Our Recommendations

40 The Impact of DemocratizingTax-deferred Alternative Investing

41 The Winners and the Losers

42 About Us

42 Contact info


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Overview

In recent decades, the U.S. capital markets havebecome increasingly monopolized by institutionalinvestors - all at the expense of America’s smallbusinesses and small unaccredited retail investors,dened as individuals who earn less than $200,000per year and have a net worth of less than $1 millionminus the value of the primary residence; or acouple that earns less than $300,000 per year witha net worth of less than $1 million minus the valueof the primary residence.

Institutional domination of the equity marketshas helped contribute to the decimation of a oncethriving small cap IPO market. As a result, today’smost promising growth companies appreciate in thehands of venture capitalists and private equity fundsas opposed to the retirement portfolios of ordinaryAmericans. The postponement of IPOs, until longafter critical company growth spurts have passed,have forced these small retail investors to servemore as an “exit strategy” to the nanciallyprivileged than as an issuer’s once coveted“longer term growth investor.”

Unaccredited retail investors are equally asdisadvantaged when it comes to accessing higher

yielding xed-income instruments. With interestrates remaining at historic lows, investors weightedin treasury, municipal and even many corporatebonds can barely outpace ination. While retailaccessible xed-income asset classes, including“high-yield” bond funds, continue to underperformand experience massive cash outows, private debtcontinues to lure institutional capital with strongerrisk adjusted returns. Unfortunately, the samerestrictive laws that prohibit small retail investorsfrom investing in private equity also preclude themfrom bolstering their xed income portfolios withprivate debt investments.

Today’s investor can no longer rely solely ontraditional stocks, bonds, and mutual funds forgrowth and yield. Some have already begun seekingalternative investments on Peer-to-Peer Marketplacesand Crowdfunding platforms. In recent years,alternative assets have become a critical componentof an institutional investor’s portfolio. According

“Over 90% of actively managed high-yield funds underperformed the broad-basedbenchmark over the past 10 years” – ThinkAdvisor


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to MorningStar, alternatives assets will becomea growing percentage of institutionally managedportfolios as high as 33% by 2017-2018, up from anestimated 27% for 2015.

Since 2005, the alternative investment categoryhas doubled in size, with global assets undermanagement (AUM) growing at an annualized paceof 10.7% —twice the rate of traditional investments

– and hitting a record high of $7.2 tri llion in 2013.New ows into alternatives were 6% of total assetsin 2013, dwarng the 1 to 2 percent rateof non-alternatives.

While qualied investors such as hedge fundmanagers, wealthy individuals, endowments,foundations, and nancial institutions are freeto choose from an array of alternative products, it

remains practically impossible for unaccreditedretail investors to access most of these types ofinvestments for their portfolios. The fact remainsthat while America’s nancially privileged have


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unfettered opportunity to diversify risk andenhance returns, Americans of lesser meansremain unfairly encumbered.

With the vast majority of Americans legallyprohibited from partaking in the upside of someof the nation’s most exciting privately-held businessand banned from diversifying portfolio risk withhigher yielding private debt instruments, the countrycontinues to experience an ever-widening wealthgap shadowed by a looming retirement crisis ofunimaginable proportions.

The choices are clear. Either public equity marketsneed to start supporting small cap growth stocksagain or rules need to change so that unaccreditedinvestors can readily access privately-held emergingcompanies. Either interest rates need to return topre-21st century levels, or rules need to be alteredso that unaccredited investors can freely invest inprivate debt.

According to present U.S. securities law, onlyaccredited investors may invest in private equity,private debt, venture capital, hedge funds, andprivate placements. Because income and networth levels presently serve as the only barometersfor accreditation, citizens of lesser means, no matterhow nancially astute they may be, are not deemedsophisticated enough to freely allocate their moneyoutside of traditional stocks, bonds, and mutual funds.

According to GAO, U.S. GovernmentAccountability Ofce - an independent, nonpartisanagency that works for Congress – only a paltry2.8% of all U.S. households are presently consideredaccredited. In other words, more than 97% ofAmerican households cannot access the sameinvestment opportunities as the 2.8%. It is this mindnumbing investment opportunity gap that continuesto exacerbate America’s wealth disparity.

As the chart below indicates, wealth inequality inthe U.S. has been dramatically on the rise sincethe early 1980s. We believe that many economistsimproperly attribute America’s wealth gulf to wageinequality found at the bottom of the incomedistribution. Whereas income inequality is inuencedby career path, wealth inequality is directly tiedto savings and investing. Unlike income, wealthis self-perpetuating. Great wealth is amassed, notthrough job promotions, but through tax deferredcompounded annual growth. As such, we believethat the spike in wealth inequality is directlycorrelated to the widespread adoption of the IRAand the 401k which began in 1982 as a result of twokey drivers:

1. Several corporations including Johnson & Johnson, PepsiCo, and Honeywell beganoffering 401(k) plans to their employees in 1982.

2. The passage of the Economic RecoveryTax Act (ERTA) of 1981 (also known as


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“Kemp-Roth Tax Cut”). Start ing in 1982, theAct raised the annual IRA contribution limit tothe lesser of $2,000 or 100 percent ofcompensation. Furthermore, it made the IRA“universal” by allowing any taxpayer under age70½ with earned income to make a tax-deductiblecontribution to an IRA, regardless of retirementplan coverage. Thus, any individual participatingin an employer-sponsored retirement plan alsowas eligible to make a tax-deductible traditionalIRA contribution.

This fundamental transition from dened benetto dened contribution plans forever altered theU.S. retirement landscape. Not only did it createan unfair advantage for those with more disposableincome by shifting investment risk from thecorporate sector to households, it forced householdsto become ever more vulnerable to the nancialmarkets. As a result, the ability to retire has nowbecome completely contingent on choice ofinvestment products. Unless and until allcitizens are granted the same chances to build a

well-diversied retirement portfolio, the wealthdisparity will continue to mushroom.


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In order to effectively halt America’s escalatingwealth imparity, two events must occur: 1) accessto alternative investment opportunities must bedemocratized, and 2) retirement plans must be ableto efciently support micro alternative investing.

Democratizing investment access can beaccomplished by converting more institutionalalternative products into retail alternative productsand/or by expanding the unjust “accredited investorrule” to include a much wider range of investors –if not abolishing it altogether. Enabling retirementplans to accommodate micro alternative investingcan be immediately resolved with technology.

Fortunately, two key factors are occurring inconuence. The nancial technology (“FinTech”)

revolution continues to inspire a great deal of retailnancial product ingenuity, and the regulatorywinds are increasingly shifting in favor of the retailinvestor. Just as technology renders alternativeinvestment products easier and more affordableto obtain in tax-deferred accounts, legislation insupport of granting unaccredited investors greateraccess to private equity and private debt continuesto garner more political backing.

In underscoring the monumental implications ofthese combined regulatory and technological forcesthat are making tax-deferred alternative investinga reality for all Americans, this white paper wil lhighlight the nancial opportunities for platformintermediaries, FinTech suppliers, and evenconventional nancial services providers.


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The JOBS ActIn late 2011, in an effort to give America’s

job creators greater access to capital, legislatorsintroduced a bill called the Jumpstart Our BusinessStartups Act (“JOBS Act”). Although the legislation

was primarily intended to facilitate small businesscapital formation during a challenging economicclimate, one of the most signicant aftereffects ofthe JOBS Act appears to be its impact on smallerretail investors. While aiming to foster small businessgrowth, lawmakers ended up enacting a law thatwould not only grant retail investors access to certainprivate equity offerings, it would also help engineera new breed of alternative xed income products

for retail consumption.

Two key components of the JOBS Act – Title III(Regulation Crowdfunding) and Title IV (RegulationA+) – permit small issuers to raise capital from anyincome level investor without having to adhere torigorous and costly reporting requirements. Althoughthese issuers must abide by offering thresholds, theyare able to sidestep the “accredited investor” rule,

which would otherwise limit their offerings to adiminutive number of wealthy investors.

As a result, unaccredited investors will be able toaccess additional investment products that expandwell beyond conventional stocks, bonds, andmutual funds. Some of these investment opportunities

now open to unaccredited investors include ventureinvesting, as well as a new class of higher yieldingxed-income alternative products created via RegA+. Two innovative businesses currently leveragingReg A+ to offer a new retail private debt productinclude GROUNDFLOOR and StreetShares.

Because many of these new retail alternative productsare emanating out of peer-to-peer lending and

crowdfunding platforms and are being engineeredemploying JOBS Act legislation, they are beingreferred to as “crowd-centric retail alternatives.”We believe that although the crowd-centricretail alternatives industry holds great promisefor unaccredited investors, it is still a very embryonicindustry. As such, “crowd-centric retail alternative”products are few and far between. A more immediatechannel to opening access to alternative products

might best be accomplished by amending thedenition of “accredited investor.”


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The Securities and Exchange Act of 1933distinguished between public and private offeringsin Section 4(2), and provided an exemption fromregistration for “non-public” offerings.

In 1935, the SEC’s General Counsel promulgateda ve factor test to determine whether an offeringis public or private, including: 1) the number of

offerees; 2) the offereers’ relationship to the issuer;3) the number of units of securities offered; 4) thesize of offering; 5) and, the manner of offering.

Despite this, for almost twenty years, the only testthe SEC regularly utilized to determine whether anoffering was public or private was the total numberof investors presented with the security purchaseopportunity — arbitrarily suggesting that 25-35

investors was the threshold number to makethis determination.

With the Ralston Purina decision of 1953, theSupreme Court ruled that a private offering was

one made to sophisticated investors, and specically“an offering to those who are shown to be able tofend for themselves is a transaction not involvingany public offering.”

In 1974 with Rule 146, the SEC provided that priorto making an offer, the issuer and any person actingon its behalf had to reasonably believe that the offeree

was either sophisticated or wealthy — ‘sophistication’in this context meaning a person who “had suchknowledge and experience in nancial and businessmatters that he or she was capable of evaluating themerits and risks of the prospective investment”; and‘wealthy’ in this context suggesting “a person whowas able to bear the economic risk of the investment.”

In 1982, the SEC effectively replaced Rule 146 as it

pertained to “sophisticated investors” with RegulationD and specically Rules 501, 502 and 506 byestablishing the Accredited Investor test for naturalpersons. This is the standard that remains in use today.For all practical purposes, the SEC abandoned the

History and Precedentof the AccreditedInvestor Rule


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gauge for sophistication and has relied primarilyon a test of an investor’s ability to bear the economicrisk of the investment. This has remained unchangedbut for the statutory exclusion of equity in a primaryresidence from the net worth computation by theDodd-Frank Act of 2010.

Section 413(b)(2)(A) of the Dodd-Frank Wall StreetReform and Consumer Protection Act (Dodd-FrankAct) requires the SEC to re-examine the denitionof “accredited investor” every four years to determinewhether it should be modied “for the protectionof investors, in the public interest and in light ofthe economy.”

The SEC last reviewed the denition of accreditedinvestor in July 2010 when the Dodd-Frank Act wasrst enacted. At that time the SEC determined thatthe denition should be revised to exclude the valueof a person’s primary residence from the calculationof their net worth for purposes of meeting the above$1 million net worth qualication, thereby dramaticallyreducing the number of accredited investors.

The SEC is currently contemplating makingadditional and very substantive changes to theaccredited investor qualications that could includeincreasing the current Accredited Investor thresholds.Any such action that would raise the accreditedinvestor standards could have harmful andunintended consequences to capital formation andthe economy at large, as it would even further reducethe number of accredited investors and drasticallyexacerbate the investment opportunity gap.

Increasing the nancial limits of the currentAccredited Investor Standard for Regulation Dofferings is not only unjust, it places an unnecessarystrain on America’s retirement infrastructure.Fortunately, a much more pragmatic and democraticsolution has been proposed. In spring of 2015, H.R.2187 or the Fair Investment Opportunity forProfessional Experts Act was introduced. The bill,which was sponsored by small investor advocateCongressman David Schweikert (R-AZ), is intendedto expand the denition of “accredited investor” toinclude certain natural persons, regardless of whetherthey meet the income and net worth requirementsunder Rule 501(a) under the Securities Act.


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On February 2, 2016, H.R. 2187 passed the U.S.House of Representatives by an overwhelmingmajority (347 to 8). While the bill still upholdscertain nancial criteria, it also enables individualsto be qualied based on non-nancial credentialssuch as professional sophistication.

Upon passage of this legislation, an accreditedinvestor will include any individual:

• whose individual net worth, including theirspouse’s, exceeds $1 million;

• with an income greater than $200,000individually, or $300,000 jointly;

• with a current securities-related license; or

• who the Securities and ExchangeCommission determines has demonstratededucation or job experience to qualify ashaving professional subject-matter knowledgeto a particular investment. Such education orexperience must be veried by the FinancialIndustry Regulatory Authority.

Fair Investment Opportunitiesfor Professional ExpertsAct (H.R. 2187)

“In America today, some of the greatest investment opportunities are availableonly to those who meet a certain wealth threshold. With the passage of H.R. 2187,Congress took a step towards expanding investment opportunity to include hardworking Americans with sophisticated professional experience. In today’shyper-efficient economy, that expansion opportunity is a key partof driving economic growth.” – Congressman David Schweikert


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The Investor Advisor Committee was establishedunder the Dodd-Frank Act to advise the SEC onregulatory priorities, the regulation of securitiesproducts, trading strategies, fee structures, theeffectiveness of disclosure, and on initiatives toprotect investor interests and to promote investorcondence and the integrity of the securitiesmarketplace. It recently recommended changesto the denition of accredited investor to allowinvestors to participate in private offerings eventhough they do not satisfy the net worth test.The Committee suggested that individuals could beaccredited investors if they had adequate nancialsophistication, education or professional credentials,or expertise as demonstrated by the successfulcompletion of an exam demonstrating theirinvestment knowledge.

According to the Committee, “expanding the poolof eligible investors that can participate in privateplacements will increase capital formation andamending the denition of accredited investor to

account for educational or professional expertisewill help to increase that eligibility pool. Individualinvestors that have the r isk appetite and ability tounderstand the private offering should be able toinvest – the government should not limit the optionsof individual investors to only those the governmentdeems worthy.”

Schweikert’s bill is currently with Senate where weare told there is solid support. We are optimistic thatit will be included into a larger nancial bill andultimately passed.

It is encouraging to see regulators and legislatorsseriously addressing inherent aws in the accreditedinvestor rule. Shifting the barometer from nancialstature to knowledge and expertise will have sweepingeconomic benets. But broadening the accreditedinvestor rule is just the rst step in narrowing thewealth gap and preventing a retirement crisis.At some point, legislators will need to considerabolishing the accredited investor rule altogether.


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In modern history, America has made greatlegislative progress in eradicating discriminationbased on gender, race, and sexual preference.Unfortunately, as evidenced by the “accreditedinvestor” rule, America continues to prejudice itscitizens of lesser means by forbidding them access tothe same investment opportunities that its wealthiercitizens enjoy.

In prior decades, when investment options werefew, bond yields were healthy, and smaller growthcompanies were able to thrive in public equitymarkets, most people did not invest outsideconventional asset classes. As such, unaccreditedinvestors were not terribly disadvantaged like theyare today.

In recent years, America’s capital markets havechanged dramatically, increasingly favoring theone class over another.

Financial innovators are continuously unleashingnew asset classes and nancial products into themarketplace. Today’s investors and nancial advisorsare constantly seeking creative ways to both hedgeand grow investment portfolios through diversication.Alternative investing is increasingly becoming anintegral component to a well-balanced investmentportfolio. Unfortunately, current securities laws

severely curtail the alternative investmentselections available to unaccredited investorswhile simultaneously providing accredited investorswith unlimited options.

Traditional equity markets are failing unaccreditedinvestors. Our nation’s most coveted growth stocksare staying private much longer, in many cases evensuspending their IPOs indenitely. As a result, our

most promising growth companies are presentlyappreciating in the hands of a select number ofventure capital and private equity funds instead ofspread across the retirement portfolios ofmost Americans.

Constitutionality of theAccredited InvestorRule Questioned


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Nor is there any relief or impartiality in the creditmarkets. With interest rates remaining at historicallylow levels, most sophisticated investors are turning toprivate debt for portfolio yield. While the nanciallyprivileged capture, in many instances, double digitinterest rates, ordinary xed-income investors are

failing to even keep pace with ination.

With publicly-attainable asset classes no longerproviding the stable and sustainable returns of

yesteryear, a national retirement crisis looms. Andwith the government denying small investors accessto alternatives simply because they are “too poor”to understand them, America’s wealth disparity

intensies. As this inequality persists and the investmentopportunity gap expands, America needs to seriouslyquestion the constitutionality of a rule that favorsone class of citizens over another.


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Investing injustice not only exacerbates the wealthdivide, it threatens to destroy America’s economic,social, and political foundation. A high level ofwealth inequality leads to rising poverty rates. Povertyis associated with increased crime and poor publichealth, both of which place added burdens on theeconomy. As poverty levels increase, taxes are usuallyraised on the middle and upper classes in order tosupport the growing number of destitute citizens.Consequently, less money is available for investmentin infrastructure and innovation, leading to surges inunemployment. Instead of being supported by realgrowth, the Federal Reserve tries to manufactureeconomic growth by manipulating interest ratesand the money supply.

Unfortunately, the United States has practicallyexhausted scal and monetary policy to the pointwhere interest rates can’t drop any lower and taxescan’t be raised any higher without dire economicrepercussions. The markets can only be articiallysustained for so long.

Furthermore, as wealth becomes concentrated infewer and fewer hands, political power becomesslanted to favor that small wealthy subset. Thisultimately leads to further government manipulationand crony capitalism which only perpetuates thisendless cycle of economic doom.

There is only one solution. And that is to return toAmerica’s democratic roots. This country was foundedon a simple notion: that each of its citizens, rich orpoor, would have the liberty to design their owndestiny. It was in this vein that citizens were giveninalienable rights, including the right to both inventas well as invest. Granting its citizens the freedomto invest in the ingenuity and invention of its fellowcitizens was what enabled America to transformfrom a vast farmland into the greatest economicsuperpower in the history of the world. By declaringthe accredited investor rule unconstitutional andallow its citizens to recapture their investing freedoms,America can reclaim that economic prowess thatallowed her to advance mankind withunbridled innovation.

The Dire Consequencesof a Class-basedInvesting System


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“I have often pointed out that the underlying premise of the SEC’s disclosureregime is that if investors have the appropriate information, they can make rationaland informed investment decisions. This is not to say that the SEC’s disclosurerules were meant to guarantee that investors receive all information known to apublic company, much less to eliminate all risk from investing in that company.To the contrary, the point always has been to ensure that investors have access tomaterial investment information on a wide range of investment options so that theycan decide for themselves how best to invest their money. With this information,investors have the ability to change the behavior of management and direction ofthe company by exercising their votes at shareholder meetings or, alternatively,voting with their feet, so to speak, by selling their stock.” - Daniel Gallagher, President ofPotomak Global Partners and former Commissioner of the U.S. Securities and Exchange Commission

The Great Conundrum: How toProtect Unaccredited InvestorsWhile Expanding their

Investing Freedoms

In addition to equality, integrity, and a new doctrinecalled investor-commanded transparency should bethe cornerstones of a successful free-marketnancial system.

Integrity is the key ingredient to any businesstransaction. Unfortunately, over the decades,there has been a rampant decline in businessethics spanning all industries – not just Wall Street.


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Although there has been a massive increasein government oversight during the sametimeframe, fraud has not been on the decline.In fact, over-regulating has had the opposite result.At some point, America needs to stop counting onregulatory band-aids to x systemic sociologicalproblems. Instead, the solution lies within oneword: accountability.

The government can best protect the investingpublic by holding fraudsters accountable for theiractions and by imposing stricter punishments.Additionally, SEC Enforcement could benetfrom tapping into the “intellectual capital” of the“crowd police” who, through the use of variousonline resources, are quick to identify and reportsecurities schemes. Technology could be asinstrumental in detecting fraud as it is in augmentingother aspects of the securities transaction, such as salesand marketing.

Investors could shoulder some responsibility too.There are numerous free resources which are availableonline that can help investors identify red ags andmake more informed investment decisions. It is not

just the government that has the ability to hold issuersaccountable for their representations. Investors, too,hold enormous power, especially when bandingtogether. In unison, investors have the muscle tocoerce issuer transparency simply by refusing toinvest into companies that lack uncommunicativemanagement and/or fail to provide reasonable levels

of disclosure. To state it another way, as “consumersof investment products,” investors can simplynot buy the product. That is the beauty of afree-market system. If investors stand united inboycotting non-transparent issuers, watch how fastissuers will open their books.

Government imposed disclosures are expensive,burdensome, and not really obeyed by fraudstersanyway. They encourage loopholes and emboldenbad actors who are constantly seeking ways tocircumvent the law. Unfortunately, in many instances,even the most well-intentioned regulations end updoing more harm than good. Although their objectiveis to deter shysters, government imposed disclosureshave the unintended consequence of punishing lawabiding companies by impeding their ability toattract public investment.

The best way to stop a fraudster is to simply notfall for his fraud. This requires education. “InvestorCommanded Transparency” provides an alternativesolution, premised on the notion that transparencybe demanded by investors, not mandatedby regulators.

If all investors only fund issuers that are openand amenable to supplying ample due diligenceinformation, they will help cultivate a new generationof more transparent private companies. It wouldultimately result in less deception in the marketsand less capital loss.


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Unfortunately, over-regulation has contributedto the dysfunction and injustice in U.S. equity andcredit markets. As a result, capital markets today workagainst America’s small retail investor. And conventionalasset classes have become less and less desirable fortoday’s retail investor.

The global investing landscape has, for more thansix years, been trembling at the hands of Wall Streetsince the nancial crisis of 2008. World leaders andcorporate titans have been in discussions on howbest to bolster the global economic recovery plan.Despite these efforts, however, many key initiativesremain stalled due to a lack of funds brought on bycredit constraints; interest rate uncertainty; andpersistent concerns over risk and viability.

History teaches that nancial deregulation is aninherently risky process, but that there aresubstantial payoffs if it is done right.

Technology and new business models are also shapingthe types of business nance and funding available, as

well as determining the ways organizations source it.High-net-worth investors are more important thanever and are increasingly encouraged to invest ingrowing small, emerging businesses through differenttypes of incentives and new funding models. Equallyimportant in this paradigm shift are the opportunitiesafforded to average working class individuals whoare now able to take part in new investment andnancing opportunities. Understanding the acutebut signicant differences between the huge rangeof nance and funding options available – from banklending to crowd-sourced funding to private equityand venture capital – is a challenge, but will be vitalfor business leaders as they consider the next stepsfor nance to suit their circumstances and needs.

Internet-based lending platforms – so-called peer-to-peer facilities or marketplace lending platforms

– are becoming an increasingly important source ofconsumer credit and have the potential for continuedrapid growth. These platforms may offer borrowersthe opportunity to obtain credit at lower interestrates than would be available to them through banks

The InvestingLandscape has Changed


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or other traditional lenders. In addition, theyoffer investors the opportunity for attractiverisk-adjusted rates of return. In general, theterm Peer-to-Peer lending (P2P) is one wherea third-party Internet-based platform acts as anintermediary between borrowers and lenders. They

must not be otherwise connected to each other, orthe platform and the loan must usually be forpersonal, charitable, or small business purposes.

There is a strong emphasis on the transparencyand availability of information on platform providers’websites, particularly relating to the risks and rewardsinvolved in P2P lending and equity crowdfundingplatforms. This should make it easier to makeinformed nancial decisions.

This new “crowdnance” constitution may not onlyresolve inefciencies and inequality in conventionalmarket structure, it is beginning to empower a newgeneration of retail products and investing platformsthat are essentially reuniting the “people’s capital”with growth, yield, and innovation.


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Modern Equity Markets

Because America’s most coveted companies no longer IPO as small caps, the bulk of their appreciation occurswhile still private. The following diagrams which contrast private versus public value creation are nothing shortof staggering.

Crowdnance:The Reconstitutionof the Capital Markets


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Stunning Uber Statistics:

• Uber is now worth 4 times the valueof publicly-held Hertz and Aviscombined. In fact, privately-heldUber is valued higher than 80%of the S&P 500.

• Uber raised a $1.25M seed round onAngelList in 2010 at a $4M valuation.Only accredited investors were allowedto participate. A $10,000 investment inUber on AngelList in 2010 would beworth $127,500,000 today!

• With over $8B of institutional dollarsinvested into Uber thus far, Uber is oneof the fastest growing companies inhistory. Yet not one Uber share isappreciating in a small retail investor’sretirement portfolio. Not one.

• Uber is not an anomaly. Companiestoday create value far faster than everbefore. Unfortunately, they arecreating value only for those investorswho the Government deems as “worthy”of accessing growth stocks.


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The SEC’s recent promulgation of Reg A+ coupledwith a sound venture exchange framework to facilitatea vibrant secondary market for small caps couldpotentially help level the IPO playing eld for bothsmaller issuers and investors. Instead of serving as anexit strategy for the nancially privileged, throughReg A+, the investing public will once again be ableto partake in the appreciation of coveted pre-IPOgrowth stocks.

Because it has only been 9 months since Reg A+went live, it is still far too early to understand thefull impact of Reg A+. There are also a numberof regulatory obstacles that remain in the way of avibrant secondary market for Reg A+ offerings –

including those that would restrict nancial servicesproviders from recommending and soliciting secondarysales of Reg A+ offerings. Despite these uncertainties,companies are beginning to take advantage of thenew rules in greater numbers than was the caseunder the prior version of the exemption. Accordingto the SEC, as of the fall of 2015, approximately 50companies led offering statements under the newReg A+ rule.

While we are optimistic that Reg A+ could possessthe potential to bring high growth opportunitiesback to retail investors, it remains to be seen howReg A+ issuers will perform and how investors willreact to these offerings.

Can Reg A+ Revivethe Small Cap IPO?


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Industry insiders have begun to look to Reg A+ asmuch more than merely a vehicle to facilitate smallbusiness capital formation. With its ability to alsoconvert illiquid debt and real-estate assets intopublicly attainable securities, the applications ofReg A+ have begun to expand beyond the equitymarkets and into the debt sector. As such, Reg A+ is

just beginning to play an important role in the

engineering of new xed-income productsfor retail investors.

This is best evidenced by online lending pioneers:GROUNDFLOOR and StreetShares. Bothcompanies have recently received SEC approvalto leverage Reg A+ in order to create new privatedebt products for the mass market. We believe thatthese innovative debt products will likely inspirethe construction of many subsequent alternativexed-income products for retail investors. Two

attorneys with distinct expertise in this niche includeBrian Korn, Partner at Manatt, Phelps & Phillips LLP,and Vincent Russo, Counsel at Robbins, Ross, Alloy,Belinfante, Littleeld LLC.

Innovative Applicationsof Reg A+ Beyond theSmall Cap IPO


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As interest rates remain depressed and conventionalxed-income returns languish, private debt isincreasingly being used as a way to dampen portfoliovolatility and generate a steady stream of returns. Asmore and more private debt opportunities becameavailable online, an entire online banking industrybegan to emerge. In its 10 year existence, Peer-to-Peer (P2P) or Marketplace Lending became

nothing short of a global phenomenon.

According to Morgan Stanley, in the U.S.,marketplace loan origination has doubled every yearsince 2010, to $12 billion in 2014. Venture Capitalrm, Foundation Capital, predicts that by 2025, $1trillion in loans will be originated online globally.

When you compare the returns and volatility toconventional xed-income asset classes, it is notdifcult to understand the staggering growth of P2Plending. The two charts below contrast the returnsand volatility of aggregate and high yield bondindices with the Direct Lending Income Fund,LP, a private credit strategy fund that purchasesshort-term, high-yield small business loans from

online small business lending platforms, includingBiz2Credit, IOU Central, Quarterspot, Dealstruckand StreetShares.

The Transformationof Fixed-IncomeInvesting


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Chart 1: Small Business Online Lending Versus High Yield Bonds

The following chart, highlighting the variance in monthly returns, underscoresthe volatility of high yield bonds funds versus the more stable online returns.

Chart 2: Small Business Online Lending Versus High Yield Bonds


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In January 2016, the Direct Lending Income Fundtook steps to convert from a private fund into apublic one in order to allow unaccredited investorsan opportunity to capture these steady doubledigit returns.

While progress is still being made with respectto the accredited investor rule, we foresee moreprivate fund managers undertaking similar initiativesto bring private equity and private credit investmentopportunities to the masses.


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Unfortunately, even most marketplace lendingand equity crowdfunding platforms do not havethe regulatory authorization to accommodatenon-accredited investors. The fact remains thatuntil the accredited investor denition is broadenedor eradicated and/or more retail alternative productsemerge, there are only a limited number of ways forretail investors to access alternatives and capitalizeon crowdnance.

The platforms below represent some of the newerand more exciting online players addressingunaccredited retail investors.

GROUNDFLOORFounded in 2013, GROUNDFLOOR is therst micro-lending community for real estate.The company began setting new crowdfundingprecedents in 2014 when it moved its headquartersto Georgia in order to initiate its “retail investorpilot program” by taking advantage of IGE (“Invest

Georgia Exemption”), one of the nation’s earliestand most progressive intrastate crowdfunding laws.Through IGE, GROUNDFLOOR has fundedmore than $2 million worth of commercial loansfor residential real estate projects. So far, more than$800,000 of lender principal and interest has beenrepaid, and not one borrower has defaulted. Perhapsthe most compelling nding from the Georgia pilotis that the average annualized yield of GROUND-FLOOR loans remains over 12% while averaging

just seven months in duration. GROUNDFLOORrecently received SEC approval under Reg A+ todevelop: “Limited Recourse Obligations” (LROs), anew retail private debt product backed by real estateassets. Additional information can be found atwww.groundoor.us.

LendingRobotLendingRobot is an online platform thatcombines cloud technologies with machine-learningalgorithms to automate peer lending investments for

Platforms that SupportRetail AlternativeFixed-Income Investing


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individuals in a cost effective and easy to useway. LendingRobot is the brainchild of computertechnology experts who became frustrated bythe signicant challenges retail investors wereexperiencing in trying to access notes directly fromP2P platforms. As CEO Emmanuel Marot put it,“retail investors seemed to be only getting the P2Pleftovers.” LendingRobot services a broaddemographic of retail investors from millennialsto retirees with accounts as low as $200 and as highas $2 million. A minimum account size of $5000 isrecommended for optimum diversication. With a9.73% average annual expected return, LendingRobotusers continue to outperform the marketplace average.Additional information can be found atwww.lendingrobot.com.

NSR PlatformNSR Platform is a retail friendly technologyand service platform that arose out of the mergerbetween industry pioneers: Lend AcademyInvestments and Nickel Steamroller. Throughintelligence-mounting algorithms, NSR helpsnancial advisors and their retail clientele consistentlyoutpace marketplace lending returns by providinginstitutional trading speeds and by designing robuststrategies using criteria that targets a high yield whileminimizing risk. NSR’s carefully designed investmentstrategy and faster execution enables its clients toaverage an ROI in excess of 9%. The company

just released NSR Platform 3.0 with new featuresincluding a comprehensive account dashboard, a

more powerful strategy builder and addedperformance metrics. Additional informationcan be found at www.nsrinvest.com.

StreetSharesStreetShares is a small business marketplace lenderthat caters to veteran owned businesses. The companyrecently made history by becoming the rst onlinelender in the country to be qualied by the SEC touse capital from unaccredited investors to back smallbusiness loans. Their new crowdlending product,created through Regulation A+, offers a xed returnto investors, a rst for this type of investment. Unliketypical “peer-to-peer” lending sites, repaymentto investors is not tied to the performance of aparticular underlying loan. Additional informationcan be found at www.streetshares.com.

Whether it is accomplished by changing theaccredited investor denition or through theoutgrowth of crowd-centric retail alternativeproducts and platforms, opening alternative investingto the masses is still just the rst step in thwarting anational retirement catastrophe. In order to maximizethe economic benets and for crowdnance industriesto scale, America needs a modern retirement vehiclethat can facilitate micro-alternative investing.


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Employing FinTech toThwart a LoomingRetirement Crisis

According to Boston College’s “National RetirementRisk Index” which measures the percentage ofworking-age households that are at r isk of runningout of money in retirement, 53% of households arecurrently “at risk” of not having enough to maintaintheir living standards in retirement. That percentagerises to 60% among low-income workers. Andit is as high as 40% even among thehigher-income workers.

As the nation facing a major reduction in socialsecurity benets and median U.S. retirementbalances at alarming lows, the best advice nancialexperts can come up with is simply, “try to savemore money.”

But how can the masses “save more” with the bulkof stock appreciation reserved for the nancial eliteand interest rates lingering at all-time lows? Theanswer is that they simply cannot, unless they aregiven unfettered access to higher yielding alternativeinstruments that can appreciate in tax-deferredretirement accounts. The problem is that currentretirement vehicles lack the technology necessaryto support widespread micro alternative investing.

America needs to “modernize”the SDIRA infrastructure in orderto facilitate tax-deferred microalternative investing

“If you prohibit most Americans from investing in private growth, and wire themarket so they can’t get into public growth, then you can’t be invested in growth.That raises the societal question of how are we going to pay for retirements? That’sthe question that needs to be asked that nobody asks because it’s too scary.”– Marc Andreessen, Co-founder of Netscape & renowned Venture Capitalist


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Most alternative products can only be held inself-directed IRA (SDIRA) accounts. Unfortunately,the SDIRA industry uses antiquated, decades-oldtechnology that cannot integrate with today’s hi-techcrowdnance platforms, making it much too timeconsuming and expensive for investors to invest incrowd-centric alternatives using retirement dollars.

The challenges and issues are obvious, and endless:

• In today’s FinTech world of rapid reautomated in the cloud platforms, it isunimaginable for crowdnance platforms topartner with an SDIRA custodian that uses 35-40 year-old legacy IT banking systems toprocess the account opening, funding, andinvestment direction, a process that can takeupwards of 8 weeks to complete.

• In today’s FinTech world of price transparencyand cost efciencies, it is unconscionable tohave complex, confusing, and industryconicting pricing policies, often costing $400-500 annually per asset, when the average P2Pinvestment consists of a mere $10,000investment spread across hundreds of P2P notes.As one CEO of a prominent P2P platform putsit, “The SDIRA industry pricing is morechallenging than pricing Turkish rugs.”

• In today’s FinTech world of scalability, SDIRAcustodians simply fall at. The industry was builtto address the needs of the retail, mom & popreal estate, or precious metals investor on a one-off basis. The industry was never intended towork on an institutional basis. As such, SDIRA’sare viewed by crowdnance platforms asnothing more than an accommodation at best.

• In today’s increasingly collaborative world,some crowdnance platforms sought to expanddistribution by partnering with establishedSDIRA Custodians who promised to“promote” a platform’s investment products totheir numerous SDIRA account holders. Thishas been perhaps the biggest “over-promisedand under-delivered” reality as these partnerships failed miserably at delivering SDIRAinvestors to the platforms. This is primarilybecause the SEC and state banking chartersprohibit SDIRA providers from promotinginvestment products to its clientele. A simplegoogle search will show that there have beenmany regulatory nes and sanctions over the

years to both the Self-Directed IRA Custodiansas well as the Investment Sponsors for this typeof illicit activity.


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For over 40 years, the retirement industry was productdriven. Investors could possess either a brokeragerm IRA which invests in publicly traded stocks,bonds, mutual funds, and ETF’s, or a Self-DirectedIRA which invests in real estate and precious metals.These investors of yesteryear were used to payinghundreds if not thousands of dollars in annual accountfees and commissions. But those sweet paydays forbrokerage rms ended as technology dislocated theirentire fee structure. Online brokerages broughtcommissions down to $6.99, or even $3.99 per trade.

Today, SDIRA custodians are about to suffer asimilar fate as disruptive technologies force themto reinvent their pricing model.

While SDIRA providers were asleep, the stereotypicalSDIRA investor has changed and so has the rulesof the market. The SDIRA client is no longer the

one-off retail mom & pop high net worth investorwith no other choice than to endure the expensiveand grueling 6-8 week process of SDIRA investing.Today’s SDIRA clients consist of crowdnanceplatforms, RIA’s, and Robo Advisors. They aretech-savvy and cater to the micro investor.

Today’s SDIRA Customer is Fed Upwith Low-tech Retirement Solutions

Unfortunately, today’s hi-tech crowdnance platformis unable to seamlessly integrate with the low-techSDIRA Custodian. Up until now, the most cutting-edge technological solution that SDIRA industry hasbeen able to come up with is… Wait for it. Wait forit… The landing Page. That’s it. Earthlings are alreadypurchasing trips to Mars and the best that SDIRAindustry can offer is the landing page.

Fintech Continuesto Change the Rules“The rules have been modied so much that we are actually playing a differentgame now. The very nature of the customer, the market and therefore of theorganization has transformed while a lot of companies are still playing bythe old rules.” - Peter Hinssen


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Up until now, the landing page is where the SDIRA“technology” begins and then ends. The landingpage, which resides on the crowdnance platform,is used to capture the client data. Once entered, theinvestor must then PRINT OUT the Applicationand Transfer and Investment Direction paperworkso that he can snail-mail it to the crowdnanceplatform for their review. It also needs to besnail-mailed to the SDIRA Custodian to beginthe long, cumbersome off-line process. Forgottensignatures, dates, beneciaries, subscriptionagreements only add to the frustration andarduous timelines.

The process is so burdensome that some crowdnanceplatforms even provide a disclaimer, “We realize thatIRAs can sometimes be challenging; please reach outto us; we can help the process go more smoothly.”With P2P loans coming on-line 4 times a day - soonto be 24/7 - it is hard to think that being “productcentric” rather than “customer centric” is goingto succeed.

Without integration or communication between theSDIRA Custodian and the crowdnance platform,the platform risks losing the investor altogether bysubjecting him to frustrating 3rd party vendorexperiences and inefcient pricing that carriesaccount opening charges, quarterly asset fees,and record keeping fees for multiple notes.

“Organizations need to becomenetworks themselves. It is the onlyway they will equal the speed of thecomplex adaptive systems that theirmarkets have become. They needto become uid, at, experimentive,creative, simple, low-cost and radicallike a network. It is the only way thatthey will be able to respond to thecustomer in the manner that

(s)he expects.” - Peter Hinssen

Merely adding a “hyper-linked landing page,”“patch,” or “bolt on” will not automate the SDIRAinvesting process. In fact, it doesn’t even begin to

The existingantiquated process


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scratch the surface in facilitating the SDIRA investingprocess. In order for true SDIRA automation, thefollowing must occur:

• Account creation needs to not only be initiatedat the portal or platform site, it needs to remainthere. Once the SDIRA Investor leaves theplatform site and enters the SDIRA Custodiansite, platforms typically lose the customer.

• Custodians need to provide more onlinecustomer support. Transfer issues remainthe highest frustration as the nature of“Self-Directing” means the investor, not theCustodian, is responsible for following up onthe transfer. A high net worth, or better yet,“Millennial” investor will never wasteweeks to months, spending hours on 800number lines, chasing his SDIRA investment.

• Investment Direction instructions along withsubscription agreements must be reviewedsimultaneously with the account applicationand not at the end of the process.

• Pricing must work for the investor, theplatform as well as the SDIRA Custodian.Some SDIRA providers currently charge platforms a nominal $50 annual fee which theplatform begrudgingly pays. At $50, theSDIRA Custodian is taking a signicantloss as the industry breakeven based upon thisold, labor intensive process is $200. While the

investor is happy about getting a “free” IRA,they remain frustrated with the entireexperience. They are tired of gettingsomething for free but not something ofvalue. After that, there is a hodge-podge ofpricing from the largest Custodians all the waydown to the local Mom & Pop ThirdParty Administrators.

• Scale – which is an absolute must – has not yetbecome a major issue simply because noplatform has truly embraced and endorsedSelf-Directed IRAs. Instead, platforms havesimply kept them as an accommodation. AsSDIRA technology is modernized, scale isgoing to play an enormous role.

• Client retirement account information needsto be accessed, managed and updated via thecrowdnance platform.

• SDIRA providers need to nd innovative andsanctioned ways to help the crowdnanceplatforms employ viable marketing solutions inorder for them to enhance distribution andmaintain customer loyalty.

• Most importantly, the entire SDIRA technologyneeds to come off the 40 year old IT systemsand move onto a cloud-based platform.

Indeed, the future of tax-deferred micro alternativeinvesting lies within the cloud.


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Fortunately, that cloud-based retirement solutionfor the next-generation alternative asset investor

has just been launched, and it will enable platformintermediaries as well as old school nancial servicesproviders to:

• Augment product distribution • Grow their retail account base • Increase assets under management

Leading innovator of SDIRA solutions, IRA

Services Trust Company, recently introducedISCP™, the rst scalable, cloud-based API driven

retirement solution for next-generation alternativeinvesting. ISCP™ replaces antiquated legacy systems

with a seamless interface between the trust custodianand the online nance platform, allowing investorsto open retirement accounts and effect transactionswithout ever leaving the platform site. We believethat ISCP™ will likely obsolete the archaic, costlyand cumbersome SDIRA investing process, andnally enable tax-deferred micro alternative investingto scale.

Additional information can be found atwww.iraservices.com/iscp

Hi-tech retirement solutions fora new FinTech driven industry

Technology Based on

Investment Platform Interface with SDIRA Custodian

Account Opening

Fund Account

Investment Direction

Investor Deals with

Investor leaves Investment Platform

Process Timeframe

Pricing

Investment Platform Access to Client Data

Scalability

CURRENT SDIRA TECHNOLOGY

40 Year Old Legacy IT

Mail

Platform Landing Page then Print and Mail to SDIRA

Paper and wet signatures

Paper and wet signatures

Investment Platform and SDIRA Custodian

Yes

4-8 weeks average

Account Open, Annual, Asset, Transaction Fees

No

One Account at a Time

ISCP

Cloud based

API

Cloud based with API



Investment PlatformChange

No

3-5 days

One Flat Fee

Yes

250,000 per hour


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How the Modern SDIRAwill Impact Financial ServicesFinancial innovation and legislation nd themselves,

yet again, intersecting, much like they had done in

the early 1980s, leaving an indelible mark on America’seconomy. Only this time around, as the modernSDIRA makes tax-deferred micro alternative investingpossible, the stars are aligning for retail investors.

Indeed, 1982 was a pivotal year not only for nancialservices, but for the nation. It marked the inectionpoint at which America’s wealth disparity began itsupward spike. We believe it can be traced to three

monumental events:

1. The IRA: The Economic Tax Recovery Actwent into effect, raising the annual IRAcontribution and allowing citizens to maketax-deductible IRA contributions alongsidetheir employer sponsored retirement plans.

2. The 401k: Corporations began offering the

401k to their employees. This move from thedened benet to the dened contributionplan had epic implications on America’sretirement system.

3. The Accredited Investor Rule: As part of amajor effort to reduce regulatory constraints

on capital formation - particularly by smallbusiness – the SEC promulgated RegulationD, establishing the accredited investordenition and allowing private issuers to offershares to an unlimited number ofaccredited investors.

Like 1982, we believe we have now reached anothercritical point in American economic history where

the merger of nancial innovation and securitieslegislation will produce monumental change. Justlike in the early 1980s, a new retirement vehicle isset to marry another rising asset class.

We believe that together the modern SDIRA andcrowd-centric retail alternative products have thepotential to transform nancial services in muchthe same way that the 401k and the mutual fund

industry did 35 years ago when they adjoined andsubsequently, in unison, ballooned into tr illiondollar industries.


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Although history may be repeating, the measures

taken today to democratize tax-deferred microalternative investing will effectively reverse the

escalating wealth gap. And the opportunities for

platform intermediaries, FinTech suppliers, and evenconventional nancial services providers are boundless.


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The $14 Trillion Opportunityfor Crowdnance Platforms

If history is any guide, then one would project thatas capital moves from traditional retirement plansand conventional asset classes into modern SDIRAsand alternative products, the self-directed IRA andcrowd-centric retail alternative markets will eventuallymushroom into trillion dollar industries.

There is currently approximately $7.6 trillion inIRAs and $6.8 trillion in 401ks – representing a $14trillion opportunity for crowdnance platforms andthose conventional nancial services providers thatseek to employ technology. To put the enormity ofthis opportunity into perspective, for every dollar inPersonal Savings Accounts, there is over $12 dollarsin an individual’s Retirement Savings Account.

The scalability of marketplace lending andequity crowdfunding platforms as well astraditional nancial services providers will

ultimately depend upon their abilityto successfully penetrate the $14 trillionretirement market. This will require theright partnerships that can supply not onlycustodial services but technology to ensureseamless integration, as well as educationaltools to enhance distribution.

The Resolution

America’s wealth divide has been called the deningissue of our time. Unfortunately, it has yet to beaddressed in any meaningful way. The solution doesnot lie within thousands of pages of tax code. Theresolution is simply to democratize tax-deferredalternative investing. And it can effectively beachieved through legislative tweaks, investmentproduct ingenuity and technology.

2 Investment Company Institute


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OurRecommendations

First and foremost, H.R. 2187 needs to pass so thatmore individuals qualify as accredited investors.Lawmakers need to go a step further and considerdeclaring the accredited investor rule unconstitutionaland eradicate it altogether. It is time that the governmentstop authorizing its agencies to waste their timevetting investors when they should be focusedon examining investments.

While our preference would be the abolition of theunjust accredited investor rule, we realize that theremay be too many imminent political obstacles. Insuch case, we suggest broadening the accreditedinvestor denition to:

• Permit individuals with a minimum amountof investments to automatically qualify asaccredited investors;

• Permit individuals with certain professionalcredentials to qualify as accredited investors;

• Permit individuals with experience investing inexempt offerings to qualify as accredited investors;

• Permit knowledgeable employees of privatefunds to qualify as accredited investors forinvestments in their employer’s funds;

• Permit those RIAs who manage retail accountsthe ability to invest in exempt offerings;

• Permit individuals who take an alternativeinvesting course or pass an accredited investorexamination to qualify as accredited investors;

• Permit individuals who have acknowledgedin writing that they have received a “riskdisclosure document” and understand the risksassociated with alternative asset investing toinvest in alternative asset classes.

We also recommend imposing harsher punishmentsfor those who deceive investors and commit securitiesfraud. Fraudsters need to be held accountable!


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The Impact of DemocratizingTax-deferred AlternativeInvesting

Democratizing tax-deferred alternative investingcould quite possibly be America’s greatest gift tofuture generations. It would help shrink the nation’sharrowing wealth divide. It would foster innovationand ensure that “we the people” capitalize on thatinnovation. It would obviate the need to stimulatethe markets through scal policy. For the rst time ina very long time, America would be able to prosperthrough real economic growth instead of beingarticially sustained through policy manipulation.

On a narrower scale, we expect that the inux ofretail alternative products resulting in more choiceswill create increased competition among marketplacelending and equities crowdfunding platforms, as wellas retail product providers. We also anticipate greaterissuer transparency as more investors will demandcandor and the multitude of online issuers will needto distinguish themselves. We predict less stock marketvolatility as equity crowd-investors tend to investbased on fundamentals. We, of course, foresee a wealthof new resources, tools, and business models emergingto support micro tax-deferred alternative investing.


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The Winnersand the Losers

Whether it is through changes in the accreditedinvestor denition, JOBS Act infused retail productingenuity, or private funds going public, the retailinvestor is about to play a much more dominant rolein the investment industry. Old School nancialservices rms and even modern FinTech platformswill need to nd new ways to employ technologyand regulations in order to accommodate an

increasingly inuential retail clientele. New leaderswill rise. Some unexpected frontrunners will fall. Thebusinesses that will best be able to oblige the retailcustomer, adapt to these regulatory changes, andpenetrate retail’s $14+ trillion retirement capitalwill prevail. But of all of the victors in this newdemocratized investing landscape, by far thegreatest winners of all will be the American people.


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About Us

Contact info:

The authors of this white paper are pioneers for themovement adoption of alternative mechanisms forPeer-to-Peer (Marketplace) Lending and Equityand Debt Based Crowdfunding that utilizes the

Jumpstart Our Business Startups Act for Title II,Title III and Title IV. We actively participate inhelping to architect the industry’s infrastructure

by way of education, debate, and peer collaboration.Our objective is to enhance job creation, economicgrowth, and assist in protecting the interests of bothinvestors and issuers, as well as advance the common

business interest of platform intermediaries and ofinenancial services providers.

Dara AlbrightPresident of Dara Albright Media

[email protected]

James A. Jones Founder of the IRA Exchange

www.iraexchange.net [email protected]

Kim WalesFounder & CEO of Wales Capital

[email protected]

This document is intended for informational purposes only. Nothing in this document is intended to be an offer to sell, or a solicitationof an offer to buy, any product, security, instrument or investment, to effect any transaction or to conclude any legal act of any kind.


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