Monthly Archives: July 2013

Protect Equity Crowdfund Investors by Strong Corporate Governance

By Antonio Arias

STOP FRAUDAs the former CFO or Audit Committee Chairman of publicly listed companies, I have resigned three times in my career to protect the shareholders’ interest. Most of my professional accountant colleagues laud the decision but others have frowned on my “radical” position. After all, taking that position means cutting my income. At one time, a CEO even tried to lure me with stock options to change my position. In all cases, I have challenged the CEO to resign or I resign.  Each one had rather have me leave. Consequently, I have won investors as friends for standing out for them and eventually the guilty CEOs had to resign.

This weekend I read an article by Mr Gwyn Morgan, former chairman of SNC-Lavalin, who has recommended corporate governance changes I have been advocating for quite some time. The business practices of the public corporate world is fraught with conflict it seems the entire system is too blind to accept the realities of commercial greed.

Here are some of Mr Morgan’s  recommendation   as written in  Globe& Mail: What I Learned from SNC Lavalin Woes (Gwyn Morgan)

Information is key

Because directors get most of their information from people within the company, they need to do everything they can to build and diversify their sources. There should be a robust whistle-blower system, independent of management, so employees can pass on information to directors without fear of reprisal.

Financial reporting structures matter

Internal auditors should report directly – and only – to the chair of the audit committee, not to management. The chief financial officer should have a direct reporting relationship to the audit committee chair. Operating division comptrollers should report to the CFO, not to the division leader or the business-unit head.

Focus on leadership

It’s important to have strong financial controls and ethical codes, but they will fail unless all people in leadership roles, from the CEO on down, follow them diligently and consistently.

Culture, culture, culture

It is said that corporate culture is defined by how people act when no one is looking. But it is also defined by how employees react when they see behaviour that is inconsistent with the values of the organization. When their reaction is, “We’re not going to let this happen in our company,” the organization is built upon a solid ethical foundation.

What does this mean for Equity Crowdfunding?

At Healthy Crowdfunder, we will manage our client-investees, by applying strong corporate governance. As co-investors, our interests will be aligned with all shareholders. A strong fraud prevention system relies on strong corporate governance policies and practices, championed by the CEO and independent board of directors.

The SECs of the world should put the onus of protecting investors in the hands of those who have the most to lose – the independent board of directors who hires the CEO and its top executives. The cost of investor protection should be proportionately related to the amount of money at risk. The larger the amount the stricter the controls. Technology is already here to mitigate some of those risks.  Let’s use it.

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Filed under For Investors, Securities law change campaign, Uncategorized

SEC Lifts Ban on Advertising to Accredited Investors – Sept 23, 2013

by Antonio Arias

See “SEC Fact Sheet” >http://www.sec.gov/news/press/2013/2013-124-item1.htm
us sec
Significance to Securities Issuers
1. Subject to compliance of Regulation D Rule 506(c) exemption Form D, we can leverage both social and traditional media to reach out to accredited investors and present our value proposition.
2. Now, investors will know we exist. They could start doing their research. Because of technology, there will be traditional and digital conversations from which we can deduce new knowledge. With new knowledge we can connect the dots previously not apparent.
3. We will know our competition. How does their offering stack against ours? If they are better, we got more work to do. In the end, the end user ends up with a better product. We all win if we put our customers’ interest on top. Our customer can be our target strategic investors or strategic partners.
4. It is the perfect opportunity to practice transparency and operate with full integrity. It is an opportunity to build trust and a longer term relationship with our investors.
5. We can find more capital on this round and future rounds if we deliver expected results. More capital will flow to the US at the expense of other countries lagging behind equity crowdfunding.

Significance to Investors
1. For long term investors, the selection of private securities of industries we believe in has just expanded.
2. We will know other investors of common interest and co-invest like a syndicate. Conducting due diligence as a group could save us time and resources if we all collaborate.
3. We are no longer restricted to investing in the volatile public capital markets. The lines dividing the private and public company exchanges will blur and eventually converge.
4. Inclusion of “bad actor” provisions will prevent actors or relevant parties who have been convicted of securities fraud or violations from participating under this new rule.
5. For professional investors like Healthy Crowdfunder, our deal flow sources have just expanded. It can lower our acquisition cost.

Significance to Consumers
1. We can be investors and consumers of the very products we need and believe in.
2. Our choices of quality products have just expanded.
3. We can participate in the creation of innovative products or solutions by the kind of companies we support.

Significance to Securities Regulators
1. We can learn how technology can allay a lot of our fears of investor safety. Technology engineers are listening and will design the relevant algorithms.
2. We will see traditional and social media conversations and will alert us about the trouble spots.

To all positive thinkers, can you think of anything else?

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Filed under For Entrepreneurs, For Investors, Securities law change campaign