CEO Paul Karrlsson-Willis Joins KoreSummit

well good afternoon and welcome back thank you so much for everyone i am wow i first i just want to say i thank

you for everyone who’s still here listening in and taking all of this in

from all these amazing speakers part of our core connects core partner ecosystem so now we’re here with the

finra broker dealers and so for all of you no no no they’re the the nx you gotta go xxx no no no

these are the people so the lawyers make your dream come true keeping you compliant these are the people that make

sure you’re fully compliant when you’re doing your offering whether it’s reg d or xcf and reggae and you really need to

listen because the game is not the same as it was five years ago or even a year ago we have a

very different commissioner on board so here you go by listening to the top um

finra broker dealers in the sector and it’s going to be led off by our friend douglas ford douglas the floor is yours

and it looks like he needs to come back i’ll get carefully that’s actually she’s gonna bring him back so as she’s

bringing them back let’s start with the introductions um first sherry please

um thank you so much oscar excited to be here so i’m sheri noonan um i think douglas actually just came back in so

i’m gonna hand it over to douglas douglas why don’t you start moderating and then we can move

into introductions we had just kicked off introductions absolutely absolutely well um thank you very much oscar for

the opportunity and uh my name is doug ruark i’m president of regulation d resources and uh we are a 22 year old

firm that specializes in the preparation of securities offerings and we also

function as a what i would call a quarterback in getting people through the process of

executing regulation deregulation cf and regulation a plus offerings um and you

know one of the key components to doing a securities offering and especially a modern securities offering where you’re

generally soliciting out into the public is is making sure that you’ve got broker dealers on board

to make sure that these offerings are administered properly and so that that’s really going to be

the the function of this uh segment is talking about the role of broker dealers

in this process one of the functions what are the advantages of having a broker dealer on obviously in certain uh

programs like reg cf it’s a requirement uh so so that’s really what the focus is

going to be is getting people to understand uh the role of the broker dealer uh one of the functions what are

the advantages because it is a really key component to this entire process and then i also

think too getting people to understand the differences as well one of the things that i’ve found is that a lot of

times people don’t necessarily understand the difference between a broker dealer acting as an a in an

administrative fashion uh versus a retail fashion uh and so we can also get

some some color on that as far as the the differences there as far as the role of the broker dealer uh in a particular

securities offering uh but let’s go ahead and get these introductions started off and uh on my screen we’ll

we’ll start at the top uh eton please introduce yourself and your firm

sure thanks doug uh atom butler here i’m the chairman at dalmore group uh we are

a finra broker-dealer headquartered in new york um we were founded in 2005 and today we

specialize in helping companies raise capital online at scale

through regulations d a and c f we’ve been fortunate over the last two years to have

onboarded over 180 reggae offerings in a quickly growing number of reg cf

offerings many of which have reached the maximum offering amount um and we always look to

share what we’ve what we’ve seen work well and not so well with our new clients

fantastic uh and i’ll then uh go to sherry sherry please introduce yourself and your firm

absolutely thank you so much doug so my name is sherry noonan i’m the ceo and co-founder of rialto markets we’re a

finra registered broker-dealer across all 50 states that empowers companies in their private markets capital raises via

self-hosted solutions and institutional investor networks across all private markets so regulation d cfna

we also operate an sec recognized alternative trading system for secondary trading across private markets

fantastic paul please introduce yourself and your firm uh yes um so uh paul carlson was um ceo

of justly markets um we are fairly new to this space

uh we are owned by a nasdaq listed company called ideonomics

who are worth just over a billion dollars currently um who have gone through the private

equity uh fundraising and actually a lot of their business that they’re building in the ev space

is actually again in private equity so it’s in our dna

we have brought that to um a thumb rating raising platform that is cf reg a and reg d

and the experience that we’re bringing in from the senior team is across the full brokerage gambit so

we’re looking at being able to offer gd as well as high level compliance

as well as global access both to uh global deals as well as global

investors fantastic um richard please introduce yourself and your firm

sure hi i’m richard leftig i’m a managing partner at castle placement we were formed in 2009

and we’re a licensed broker-dealer we have raised billions of dollars of private

equity and debt capital for our clients we just started getting active

in equity crowdfunding at the beginning of this year

and we’ve gotten quite active and planned to continue to do so

fantastic all right so let’s let’s start um eton i’m going to pitch this question to

you um you know so for for reg cf offerings you know you’re either executing that type of offering on an

sec approved crowdfunding platform or you’re executing it with a finra broker dealer that’s administering it uh and

reggae um right that’s really the one that requires it right d and reggae plus you’re not required to have a broker

dealer on board although most most people that you know have are in the industry would obviously tell you that especially with reggae plus you’re going

to want a broker dealer on board let’s talk about um the the the general role of of a broker dealer and and uh

let’s go ahead and we’ll maybe use reggae plus as an example but obviously it kind of you know works across the spectrum so i’m an

issuer i’m getting ready to execute a securities offering and uh ultimately why would i need a broker dealer on

board and i say need let’s go ahead and we’ll use it for a reg a standpoint where maybe it’s not required

what what would be the function of the broker dealer uh in in that standpoint and from an administrative standpoint

and then i want to then step into talking about obviously the differences between that and then operating in a

retail standpoint yeah so you don’t need a broker dealer involved for a reg a a reggae could be

an issue or directed offering most people choose to work with the broker dealer first because it’s it’s a

more efficient way to offer your securities in all 50 states provided that the broker-dealer is is registered

and licensed in all 50 states um many people also choose to work with the broker-dealer to conduct their

offering through a regulated entity and there’s a number of benefits to to doing so but the bd’s role includes um

due diligence um on the issuer on the uh on the on the issuing company on the

officers and directors as well as ongoing compliance and review and approval of every single investment that

investors make into the offering so there’s the administrative side and then there’s the value add side right if

you work with a broker-dealer that has experience in observing um multiple

reggae offerings and seeing perhaps why certain ones are not working out well and other ones are that could be

particularly helpful in from an investor acquisition perspective from a distribution and syndication perspective

an investment banking perspective uh as well as an understanding of how financial publications

and newsletters work uh so there’s multiple components including co-listing the offering on other platforms that you

get by having a a broker-dealer of record or a a a lead managing

broker-dealer involved uh in the offering yeah absolutely and you know uh one of

the things that i always like to you know to to impress upon issuers is that uh you know especially with something

like reggae plus i mean you’re executing uh something that’s that’s uh you know more sophisticated exempt offering that

you can execute so it’s it’s one level short of an s1 essentially and uh so it

is very important to have a broker dealer on board in that regard uh obviously a 50 state licensed broker

dealer there’s also the problem state issue where uh there are there’s additional filing even with tier two reg

a plus uh where you’re federally uh qualified there’s still additional filings in certain states related to

their broker dealer rules and if you have an admin broker dealer on board uh you don’t uh you obviously don’t have to

worry about that uh as an issuer um the um from uh from a retail standpoint sherry

can you talk about uh just kind of the differences between maybe an admin uh relationship with a broker dealer with

an issuer versus say a retail relationship i know rialto has the capabilities to do both and i think that

might be helpful for people that maybe they’ve never really had interaction with a broker dealer and they maybe don’t understand that terminology what

would be the differences between a broker dealer operating from a retail standpoint versus an admin standpoint so

a retail standpoint meaning actually assisting with outreach is that correct

perfect okay so and this is a it’s a great question great question doug so

the primary work when we’re when we’re working with issuers in terms of as a broker dealer and a lot of other broker

dealers that are on this panel um they’ll talk about the the compliance end of things and the compliance end of

things refers to everything from the actual marketing reviews that aton went through

and then everything as all the investors come in making sure that you know your

customer anti-money laundering and suitability checks are done and then confirming the money movements so

matching up those um approved investors with um the the actual monies coming

into the escrow account that’s really the operational end of making sure that a raise can flow and you can imagine if

you’ve got a 10 million offering and you have 10 000 investors that’s quite a heavy lift if you don’t have something

behind the scenes really managing that so so that’s really the operational end in addition you can work with a broker

dealer that has a distribution network and can really assist with um

pushing out distribution from um an eyeball’s perspective you know finding

investors that are interested in the in the actual investment and that’s really when we talk about the retail um broker

dealer end of things we don’t um bring investors to the offering however we do

have relationships with um investment banks and others other broker dealers um to be able to federate that deal out to

platforms and other interested investors to facilitate that end of the um of the

relationship perfect um so let’s also talk about i i think one

of the things that i i would encourage people to do is is that you know if you’re interested in doing one of these offerings if you’re interested in having

a broker dealer on board again it is a requirement with reg cf but if it was a reg d offering a reg a plus and one of

the things i encourage is is is call around talk to a number of broker dealers it’s obviously the uh the the

core core connects uh ecosystem others there’s there’s fantastic broker dealers in that ecosystem obviously um paul i’m

gonna pitch this question to you so as far as fit goes i know your your broker dealer um focuses on like uh i believe

like social impact type uh uh type investments so how important is it

for for an issuer to really work uh to interview different broker dealers and really make sure there’s a good fit

there between themselves and the firm doug i think that’s the key element um

as you said there is uh there are a lot of good broker dealers out there in this space and and you have um you know three

of the best here with us uh um today or all of us um i would say that

again it it’s um access is going to be one of the key things you want

um there are broken dealers as as um has been mentioned already

where they work more with venture capital uh companies or family offices

as a way of getting investors onto you into your deals

we for instance have family offices we have venture capital but we have a very very big retail network as i said we are

owned by uh ideonomics they have over 300 000 retail

shareholders we have access to that client base um as we’ve mentioned um justly is an impact

broker dealer uh and what we mean by that is that we are actually focused a lot on companies that are esg

but we also have companies or issuers on our platform that are not esg

because we do believe that we want to give our clients a good access to uh

good issuers so we’re actually donating a percentage of that profit

to a non-profit that specializes in an esg so we’re kind of talking to the client

base that we know is out there that belong to ideonomics as well as the

growing client base that we are seeing out there that want to make an impact and want to do

esg and be involved in that way so again

if someone’s uh an issuer in esg then we would be an ideal fit

um there may be another broker out there that they would speak to

that has a better offering that suits their issuance and someone could be specializing in pharmaceuticals someone

could be specializing in real estate and i think we can all talk to various broker dealers in this space

that do specialize in real estate is real estate was one of the key uh

elements to to growing this space so it is important the other questions

to ask is how is um how is aml and kyc done um and and

the sec and finra are really looking at things right now in that space especially around social media so again

how can the broker dealer help you monitor social media help you with the message that you want to send out those

elements are very very key so it is it is important to speak to more than one

uh broker dealer uh richard i’m gonna come to you with this question so uh i’m an issuer and um

i’ve decided that uh you know that i want to work with uh with your firm i want to work with with castle placements

so what uh walk walk me just assume i’m a neo if i walk me through what does

that process look like uh you know from from engagement through to getting a

5110 filing in um what what does that look like just because you know i know

in our firm we get a lot of people that ask questions about that they you know there’s there’s kind of the base uh

discussion of what does the broker dealer do and why do you want them on board uh but then there’s the question

of okay well what does that interaction actually look like to go from introduction to the point where they’re actually on board with the offering

sure so we treat the process very similarly to

the way that we do reg d506c so we do full on due diligence on the

issuer and simultaneously we are

preparing and strategizing on the marketing materials

so as soon as we get through the you know what we call the four pillars

which are due diligence the

audit the documentation with the sec

and completing the landing page and ancillary marketing materials

we launched the transaction so you know to us it’s

i don’t want to put percentages on it but if i if i had to i would say it’s like 50

of a legal regulatory compliance process and 50 of the strategic marketing process

uh aton so one of the questions that we get a lot is um okay i’ve got dalmore

group on board admitting my offering again we’ll just use an example say it’s a reggae plus um and one of the

questions that we get a lot is is it possible to have multiple broker dealers involved in one of these offerings and

so let’s say dalmore is on board administering a reg a plus what does the process look like if if as an issue or

i’m able to find let’s say another broker dealer that has uh retail clients that want to invest what does that

process look like to have additional broker dealers potentially come in and work on selling that offering if

there’s already a dow more group in place as the admin broker dealer so you have the admin broker dealer that

gives you the ability to host your offering on your own domain for a low cost relative to what most

people think broker dealers charge and to direct all of your promotion marketing

your own ecosystem of investors friends families and institutions to your own website where you’re the sole

beneficiary of that promotional effort and exercise now you’re at a position of strength and

you could then look at okay how could other broker dealers and other investment banks and other

platforms help me on a success fee only basis we have a number of our clients that are

listed on other platforms we encourage it and in fact we introduce them many of them too we have some clients that are

listed on republic co-listed we have some some of our reggae issuers are listed on start engine and and and and

many others um and so if you’re a yield based offering we have i think 10

private reits you’re not going to want to pay a a seven eight nine percent fee but if

you’re a an equity offering and the valuation is sufficient to justify paying a typical six seven eight percent

fee to another platform there’s a number of other platforms that are out there uh now you have to want to be on that

platform and that platforms committee has to accept you as wanting to be there but what you’re doing is you’re putting

yourself in a position to um you know to to to receive

potential investors that otherwise may not have recognized your offering reg a is very different than reg d reg d

the old school way was to build the syndicate you had a master broker dealer and you would build a selling group around it

most broker dealers are not calling their book of business with a thousand dollar investment opportunity that could

be put on a credit card so you want to get in front of where these inves these typical reg a investors are and they

happen to be consolidated on a number of uh pretty successful platforms so you know a couple of them are the ones i’ve

mentioned so there is a value add in in running your own campaign on your own site for a low cost while at the same

time putting yourself in the position to get in front of hundreds of thousands or a million potential investors and some

of the other platforms and you’re not limited to one or two or three you can grow that as far as you want

fantastic sherry i’m going to come to you with this next one so uh you know one of the things that

i’ve really enjoyed is is watching the technology uh um over the last you know especially

the last five to seven years but the technology that has uh developed to not

only take people through the subscription processes through a web-based system do it efficiently uh but also some of the the

the ability then for broker-dealers to have a back-end gateway into a system uh to uh to to verify the securities trade

uh the security sales and what have you so one of the benefits obviously of core connects in their system is that they

have those back channels so can you talk uh about the importance of first of all

having a good solid back end network uh for the processing but then the broker dealers interplay into that type of

system wherein the broker dealer is able to go in and efficiently track and and engage in the compliance checks on the

security sales absolutely i i think that’s really important when when we think about private markets and when we first got

involved in private markets something that really struck us was the the fact that there really wasn’t a ton of infrastructure built and i think now the

industry has built that infrastructure which is fantastic but it’s infrastructure from the standpoint of

the investment the investment side and really creating infrastructure to be able to allow um

thousands and tens of thousands of investors to come in in a cost-effective way and invest in in a securities

offering and the infrastructure required then for all the service providers including the

broker dealer to be able to effectuate that process right to be able to have everything at their fingertips

around the information they need to to make that process run smoothly and scalably and scalably if that’s a word

to to scale um and then you know manage that entire process there’s there’s really you you need

infrastructure like what core connects um sort of delivers to to pull all of

that together i think in addition though being able to have a system on the back

end where your cap table can be managed and broker dealers were hooked in um to

the core connect system and we can go in and see the the cap table when

when it’s appropriate to understand what the securities look like what restrictions might be on the securities

and any conferences or if there’s still seasoning for any type of transfer trade

information is is critically important to me that’s what’s been missing and being able to build that that

infrastructure is what’s going to be required to get the industry to the type of scale that’s being anticipated um in

in the next year to two years paul

so i’m going to play the role of the the neo fight issuer again um so i i’m

looking to execute an offering and i’m interested in getting a broker dealer on board one of the questions that we get a

lot is what are the fees uh what does it look like as far as a fee standpoint uh

to engage a broker dealer and have them on board um and let let’s go ahead and again we’ll set a baseline and we’ll

we’ll say reg a plus and then i’ll i’ll go to uh maybe eton and we’ll we’ll do a cf

version of this but let’s say reggae plus what what can people expect i’m an

issuer i’m looking to get uh your firm on board you know what what would be typical as far as the fees uh and the

commissions that we would be paying to have a firm like yours on board and and kind of what would be what would be

typical obviously in the in the market yeah great question i think um if in

most cases if if the broker dealer is just going to be broke a dealer of record um you would normally find that

they will charge around one percent uh to do that of of the race

um and then it’s really what else that broker deal is going to do for you and again we we touched on this a little

earlier about um talking to the various broker dealers seeing where their value add is

um so if you’re going to have a broker healer that’s going to help you with dd uh if you’ve got a broken deal it’s

going to work with your legal counsel um if you’ve got a broker dealer that’s going to do the fundraising

then you know someone like ourselves we charge between five and eight percent

of what we raise so when we put uh an issuer on our platform and we go out to

those 300 000 plus clients plus the family offices and so forth uh we will

charge we will charge between five and eight percent on what we raise uh

ourselves in that deal for for our client um i think the the standard is between

five and ten and again that will sometimes differ between the service offering uh and how much is being done

uh and also the type of deal right if it’s a cf and a d you normally find the

pricing is is a little different but i would say that uh you normally see us

between five and ten percent okay sounds good uh eitan eton i’m an

issuer i’m coming to you i’d like i’d like dalmore to i’d like to do a cf offering with dalmore so let’s talk

maybe on specifically on the cfs uh are there differences there in the market as

far as what the commission impact would look like are there may be equity components that would maybe be a little

different there you know reg a is a different program than reg cf so if someone’s coming through and they’re looking to do a cf

what would they typically see as far as fees maybe a kind of equity give up component there uh to the broker dealer

can can you speak to that sure so across the market what you’ll see on many of the marketplace platforms

will be somewhere in the range of seven and a half to twelve percent when you add the uh the kind of the cash and the

and the equity fee combined um our fee structure for cf uh includes a an

upfront fee for due diligence as well as a three-in-one structure for capital

raise meaning three percent cash one percent stock um at the on on funds raised at the valuation of the offering

great sherry uh i’m going to pitch this question to you so um

what what what role might a broker dealer play after the offering is closed i i know uh

you know rialto has an ats system um but is there a role or a benefit uh to

having a broker dealer on board after the offering and maybe that is even just you know discussing things like like

like having access to an alternative trading system can you speak to that so after an offering is completed um

actually from an operational perspective many of the offerings that we have will have um you know tails in terms of the

offering closes but there are still operational things that need to be done whether that’s the escrow you know

tidying up the escrow finalizing any communications with investors that have come in

making sure all of the funds are ticks and tied and that’s really um that’s really takes longer and in terms of um

post the actual close of of the um offering um after that once everything

you know the dust has settled as it were you issuers can um apply to place on an

alternative trading system um that allows for private um private market secondary transactions

and i saw in the chat that there were a few conversations around that realtor markets as well as a few others

there’s a panel later today does offer a secondary market trading through our

alternative trading system we offer it directly with retail um clients so we’re not a broker to broker system although

we do welcome brokers on on the platform as well um so issuers can place their

issuances onto the system and allow for their investors to monetize that um that

investment fantastic well um look first of all i want to kind of end

here on this segment by saying that it’s really been an exciting time uh over the

last 10 years or so with the changes that came through with the jobs act uh with the streamlining of

reg a plus with the enhancements they’ve done to regcf uh it’s really an exciting time right now for for private companies

to be able to go out and use some very sophisticated programs to syndicate capital i think ultimately if you’re

doing that type of offering uh you know especially a type of offering that’s going to allow you to go out into the public domain and solicit investors it’s

critically important that you have the proper support staff and support vendors in place and a

brokered dealer in my opinion is is just a given um i mean obviously it’s a requirement in a cf uh uh yeah i would

prefer to see it in reg d’s uh but yeah with reggae plus especially i mean you’re executing essentially uh you know

a private ipo uh and that is a very sophisticated process and ultimately

you’re gonna have a lot of investors coming in from a lot of different states you’re gonna want that broker dealer on board uh and obviously we’ve got uh some

of the best here right on this panel and i’ve appreciated the opportunity to moderate this oscar as always thank you

very much and uh thank you to everybody that’s been on the panel it was really fantastic information and hopefully

people now have a better understanding of where a broker dealer fits into this equation and obviously what can their

role be in the offering and then obviously what do their fees look like and uh and what does the process look

like to actually engage a broker dealer thank you so much

thank you doug thank you doug