26 November 2016-The private placement services sect, comprised of thousands of trained professionals, is being disrupted. Maybe.
Or, so hope those who are pioneering the world of equity crowdfunding and, so fear those who are threatened by one outcome of the JOBS Act, legislation that helped introduce supposedly simpler and more social way of raising investment capital. The private placement ecosystem, traditionally private in every sense, now includes equity crowdfunding, an internet-driven silo that leverages innovative fintech tools that are designed to disrupt the capital formation process across both private placement and public investing markets.
At very least, professional service providers who are fluent in both PPM documentation and regulatory issues need to get up to speed or re-purpose.
iDisclose, a technology company, recently made headlines in the crowdfunding world. Earlier this month, Indiegogo, in partnership with MicroVentures, an online investment bank, announced the launch of a new equity crowdfunding service which allows anyone to invest in startups and growing companies. The joint venture selected iDisclose to power the regulatory filing process and now the combined start-up venture is betting against long odds that its toolkit can actually displace the high touch and bespoke services provided by the likes of PPM Group’s Prospectus.com
According to a sponsored news release issued by the equity crowdfund pact, in addition to investment listings featured on both Indiegogo and Microventures, startups can also take advantage of a tool set for the regulatory filing process, powered by iDisclose. Through an online questionnaire, this service professes to automate legal document preparation and regulatory filing for capital raising companies that don’t require a full private placement memorandum or PPM disclosure document, as well as a tool that helps prepare Form C filings.
“It’s an interesting online service,” says Imran Migdal, a Case Researcher at Harvard Business School. “Introducing so-called ‘fully automated’ approaches to the private placement memorandum process is akin to the still-unproven investment industry robo-advisor platforms, which purport to deliver better investment outcomes.” Added Migdal, “For the limited universe of equity crowdfunding, it is certainly a logical ‘what’s next’ in terms of fintech disruption, but software is called soft-ware for a reason; sophisticated players in the private placement sector will always require nuanced bespoke services and safe hands administration.”
Peter Berkman, a Florida-based securities attorney who specializes in private placement services, and also the founder of Phoenix OTC Services, a ‘listing rehabilitation service” for NASDAQ OTCBB and “pink-sheet companies”, stated “Because regulatory filings are now codified, it presents great opportunities for companies like iDisclose to add efficiencies to certain tasks, but human intervention remains part of the equation.”
iDisclose and its partners are aiming to achieve for the equity crowdfunding industry what the securities industry calls ‘straight-thru-processing.’ Often referred to as “STP” in the mainstream world of electronic brokerage, it is the process by which each step of an investment transaction is automated without human intervention; from order submission, to back-office-accounting, to the step in which funds are exchanged for securities (‘trade settlement”) and to trade reporting, where the details of transactions are reported to industry regulatory and self-regulatory agencies.
Online private placement services and offering document tools first came to the web in the late 1990’s, including industry stalwart PPM.net. An early entrant to the web-facing world of professional service providers, PPM.net provides access to a global database of more than 10,000 genuine offering memorandum documents from across 100 countries, including PPM documents for every industry sector. The subscription-based private placement electronic library is used by global law firms, boutique investment banks in every part of the world and leading law schools and graduate schools of business, the latter of which receive reduced membership fees.
In addition, global consultancy PPM Group, whose principals have more than 125 years combined experience from across corporate finance, capital formation and securities law, operate both PrivatePlacementMemorandum.com and Prospectus.com, the latter of which provides a deep menu of bespoke private placement offering services for both startups and seasoned companies in every region of the world.