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Dear “Jay”-The New SEC Head

January 4, 2017

A new Chairman of the U.S. Securities and Exchange Commission, Walter “Jay” Clayton, has been nominated by Preident-Elect Donald Trump. Here is what I want to tell him about the SEC

Dear Mr. Clayton:

Since passage of the Jobs Act of 2012, thousands of entrepreneurs have been hopeful that regulations for Crowdfunding for financing from non-accredited investors would be promulgated. Finally, last year, in hopes that the logjam had been broken, I attended a meeting of the SEC where new regulations were promulgated.

I was deeply disappointed because I attempted to use new Form D regulations that permit general solicitation of investments from accredited investors.

This is an account, of one person’s attempt to file a Form D 506(c) registration. If this account is not unlike that experienced by other persons who want to comply with SEC regulations, we’re in deep doo doo.

Without pre-judging the technical competence of the technical staff at the U.S. Securities and Exchange Commission, this report suggests that the SEC is totally unprepared for the massive numbers of persons who will seek to register private offers of non-registered securities if and when regulations for Crowdfunding from non-accredited investors are promulgated.

The journey anyone seeking to comply with new Crowdfunding regulations begins by going to the SEC’s unnecessarily complicated website located at http://www.sec.gov. Finding where to go on that website to make application requires at least one, and possibly, two phone calls to the SEC’s technical support staff.

Finding the telephone number to call is also difficult. Telephone numbers at the SEC re not posted on the Home Page. Rather, it is necessary to scroll to the bottom of www.sec.gov and click “contact.”  If you do that, you will see that the SEC’s phone number can be obtained by clicking “Key Telephone Numbers.”  There you will find twenty telephone numbers.  Of those nineteen telephone numbers, which should you choose?

The number you need to contact Technical Support staff is listed as:

SEC Toll-Free Investor Information Service: 1-800-SEC-0330

Since we are by custom used to pressing the numbers buttons on our phones,  and because some phones, particularly older ones, do not readily display what numbers the letters “S” “E” “C” represent, this designation simply places an additional step on your way to calling the U.S. Securities and Exchange Commission.

A review of SEC regulations tells you that in order to make an “Edgar” filing, you need a CIK code. If you’re curious and wonder what “CIK” stands for you must use the “Search” function. A “CIK” code is the “Central Index Key.”

Once you contact the SEC’s technical support staff they will courteously assist you in making application for a CIK code. This will require at least two phone calls to technical support to find out how to do that.

After you obtain a CIK code and attempt to become an “Edgar Filer,” you will find that no matter how hard you try, the system won’t access your CIK Code and password.

This requires two additional calls to the SEC’s Technical Support staff.  I was told that only Internet Explorer 8 can be used to complete your application. That was awhile back, so I hope things have been improved  But, I recommend using only Internet Explorer when filing anything with the SEC.

Even then, It took this reporter three days and eight phone calls to make a successful filing.

If your offer of non-registered securities actually leads to some financing, the filer must submit an amendment to his Form D and indicate how much financing was raised.

Like most procedures, unless you use them frequently you lose what you learned in order to complete them. Again, the SEC website isn’t helpful, so another call to Technical Support is required.

When you do that you will be told that the SEC’s Technical Support staff  are not attorneys.  They are trained to assist persons making their initial filing, not all the follow-up filings that may be required.. For instructions in that procedure you are given a number (202 551 3460) where the legal information needed to comply with regulation 506(c) could be obtained.

That number has a recording with two options. If you stay on the line, you may give your name and contact information and the reason for your call. The office will attempt to reply within one business day.  Or, you may choose to speak to the operator. That option leads to a recording with a similar message.

Leaving a message with the operator is useless.

If you want assistance you must use the latter option, and leave a message with the SEC’s legal staff. Three attorneys responded to repeated messages that were left on the SEC’s answering machine, none of whom knew what to do at the SEC’s website.

This experience was frustrating and speaks volumes to the inattention to “customers” at the SEC and most government agencies.  After all, the SEC’s mission is to enforce the law, not make it easy for entrepreneurs to comply with the SEC’s regulations.

It is clear, however, that few personnel in a responsible appointive position at the SEC has attempted to use the SEC’s website to attempt to file or submit anything required of those who must comply with SEC regulations.

And, despite the celebrity of those new Crowdfunding regulations that a Trump SEC may permit entrepreneurs to use the Internet to solicit investments from non-accredited investors, the SEC has done nothing to prepare for that eventuality.

The solution to this clear inability of government to treat taxpayers as “customers” may be the private sector.

For example, if you want to find out who is making Form D filings, the SEC website is too complicated.

But, if you go to a commercial site, http://www.formds.com, to find what Form D filings have been made, it’s very easy to find out.

No company in America would long survive, if its public websites functioned in the manner that the SEC website functions.

Is the entire leadership and professional staff of the U.S. Securities and Exchange Commission incompetent? No. They are simply not equipped for Internet communications.

If you use the Search mechanism at www.sec.gov to search for “SEC Chairman,” for example, you are taken to a page that takes you to the biography of Chairman May Jo White.  Why be bashful? Place the Chairman’s picture, biography and contact information on the Home page and invite the public to contact him.

.

 

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