Friday, November 16, 2012

Minorities and the SEC Forum on Small Business

On November 15th, the SEC held a Forum on Small Business Capital Formation. The Forum, held at SEC Headquarters, covered the following:

9:00 a.m.- Call to Order - Gerald J. Laporte, Chief, Office of Small Business Policy, SEC Division of Corporation Finance - Introductions of Chairman and Commissioners
Meredith B. Cross, Director, SEC Division of Corporation Finance - Remarks
Chairman Mary L. Schapiro, Commissioner Elisse B. Walter, Commissioner Luis A. Aguilar, Commissioner Troy A. Paredes, Commissioner Daniel M. Gallagher

9:50 a.m. Panel Discussion: JOBS Act Implementation- Moderators: Meredith B. Cross, Director, SEC Division of Corporation Finance, Gregory C. Yadley, Partner, Shumaker, Loop & Kendrick, LLP.
Panelists: Sara Hanks, Co-Founder and CEO, CrowdCheck, Jean Peters, Board Member, Angel Capital Association; Managing Director, Golden Seeds Fund LP, Michael Lempres, Assistant General Counsel & Practice Head, Silicon Valley Bank, William Beatty, Director of Securities, Washington State Department of Financial Institutions

11:20 a.m. - Panel Discussion: Small Business Capital Formation Issues Not Addressed by the JOBS Act
Moderators: Meredith B. Cross, Director, SEC Division of Corporation Finance, Marty Dunn, Partner, O'Melveny & Myers LLP.
Panelists: John Borer, Head of lnvestment Banking, The Benchmark Company, LLC, Professor Robert Bartlett, University of California, Berkeley School of Law, Ann Yvonne Walker, Partner, Wilson, Sonsini Goodrich & Rosati.

2:00pm - Breakout Groups Assemble to Develop Recommendations
~ Exempt Securities Offerings Breakout Group
Moderator: Gregory C. Yadley, Partner, Shumaker, Loop & Kendrick, LLP, Tampa, Florida
~ Crowdfunding Breakout Group Moderators: Sara Hanks, Co-Founder and CEO, CrowdCheck, Vincent Molinari, Co-Founder and Chairman, GATE Technologies, LLC'
• Securities Regulation of Smaller Public Companies Breakout Group
Moderator: Spencer G. Feldman, Partner, Greenberg Traurig.

3:30 p.m. Breakout Groups to Develop Recommendations

5:00 p.m. Plenary Session to Develop Next Steps
Moderators: Gerald J. Laporte, Chief, Office of Small Business Policy, SEC Division of Corporation Finance, Gregory C. Yadley, Partner, Shumaker, Loop & Kendrick, LLP.

The first thing to notice about this lineup is that it includes no African Americans. None.

I think this is reflective of the Agency's stance in a number of ways. We have written about this before, specifically on Aug 13, 2012, when I submitted a "Friend of the Court" brief in a case currently pending before the United States Court of Appeals for the Second Circuit. 

The case concerns the rejection, by a Federal Judge, of a settlement agreed to by the United States Securities & Exchange Commission (SEC) and Citigroup Global Markets Inc. (Citigroup), the latter accused of securities fraud.

As I noted in my brief, on July 9, 1993, Mr. Cunningham wrote to Mary Schapiro, the current Chair of the SEC, when she was a Commissioner to notify the Commission about a certain, specific investing "scam." A timely warning was not issued to the investing public. That letter to the SEC, dated July 3, 1993, described correspondence to Mr. Cunningham dated July 2, 1993 from an “officer” of the Nigerian Ministry of Finance. The SEC acknowledged receiving this warning, in a letter to Mr. Cunningham dated October 29, 1993. Several American citizens were, in the interim, "taken" by these scam artists.

This may indicate a pattern of hostile behavior toward African Americans on the part of the Agency. The Agency’s behavior and lack of diversity led it to ignore warnings of the financial crisis originating from those outside the majority community. It was unconcerned about unethical market behavior at very large financial service providers, since those behaviors initially impacted the African American community. Now, with Crowdfunding, a tool that is of particular relevance to the minority community, the Agency does not include representatives from an American community in the discussions concerning the law.

Title VII of the JOBS Act "requires the Commission to provide online information and conduct outreach to inform small and medium sized businesses, as well as businesses owned by women, veterans and minorities, of the changes made by the JOBS Act."

Given the lack of diversity in the speakers at Thursday's meeting, the Agency may have already violated the law.

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