It should come as no surprise that Minnesota’s Department of Commerce, the statewide agency responsible for regulating corporate securities, has issues with proposed intra-state equity crowdfunding legislation SF 138 – aka MNvest.
In accordance with the Department’s ongoing consumer vs. industry balancing act — the agency is fraught with its own financial woes exacerbated by the prospect of more oversight responsibility added into the mix.
Additionally, the Department’s
regulatory capture “leadership position” at NASAA (North American Securities Administrators Association), is a key relational dynamic in an industry that has a lot to lose here by being cut out of the deal.
So why would government-as-an-enterprise want to assume more work at esentially the same budget, while simultaneously underming the status-quo master it serves?
Of course the Department of Commerce is against such notions of fundamental change that would empower the entrepreneur at their expense. As evidenced, here’s a letter of “major concerns” raised by Commissioner Michael Rothman, sent to MNvest chief author Senator Terri Bonoff on January 28th and currently under consideration:
Hidden among the red herring of “investor protection” are elements with deadly scope, specifically:
Item 3: “Portal Operators and Issuers. Allowing issuer companies to serve as portal operators raises significant concerns for both investors and issuers themselves; offerings should be conducted through the use of a registered broker-dealer serving as an intermediary.”
OK, flat out — if broker dealers are required to act as intermediaries between the issuing company and its investor marketplace, MNvest will die before delivery. Everyone might as well pack up and go home now because it’s game over. The whole point of equity crowdfunding is to enable peer-to-peer commerce, not to continue with legal coercion that require entrepreneurs and investors engage state sponsored 3rd party players who suck the life out of such transactions by extorting time and money.
Item 1: “Offering and Investment Limits. The upper limits for amounts issuers can raise – from a single investor and in a 12-month period – are too high.”
So the cleanest way for the Department to kill MNvest, for the legislature to gracefully submit, and for two up and coming attorneys to save face — isn’t by cold blooded murder (item 3), rather by means of handicap. Adversely influencing the bill by lowering the issuer/investor caps, means a zombie version passes, one alive on paper but dead in reality. As the practical application for entrepreneurs to pursue and the upside incentives for investors to participate are chopped down and stripped away, it’s a death by handicap.
Now, the good news for those who seek to live and work in a place of economic prosperitity — is that the Department of Commerce does not have veto power over MNvest and cannot single handedly take this bill out. They do, however, have political leverage and influence in ways that extend beyond the comprehension of everyone outside this inner circle of politicians, regulators, and lobbyists (which also happens to be the same 99% MNvest aims to impact).
So here’s the rub: Senator Terri Bonoff knows what’s happening. The MNvest lobby, led by Zach Robins and Ryan Schildkraut, they know what’s happening. The Department and its Commissioner Mike Rothman know very well what’s happening.
And this author also knows what’s happening, for as I was recently told, ‘this is how the sausage is made…deal with it.’
Fair enough, for we can all now recognize this is a negotiation unfolding between the entrepreneurs who seek the right to define their destiny in the modern marketplace, and those, whose benevolent wisdom, backed by force, are simply there to protect us from ourselves.
Ultimately, if enough economic freedom fighters are strong in both spirit and action, they shall achieve a better way of doing business in this state. But if they underestimate the stakes or lack the courage to stand up for for themselves, their peers and the generation of entreprenuers that follow — then they will languish in their own mediocrity for years to come.
Requests for observance and transparency of said sausage making meeting this Friday between legislators, lobbyists, and the Department of Commerce were were declined by Senator Terri Bonoff.
You read that right: entrepreneurs not allowed.
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