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Michigan Entrepreneurs and Small Businesses: Crowdfunding Law Update.

Last year  Representative Tom Barrett introduced House resolution2015-11-26-13-04-02 235 (HR 235)

“to support the (SEC)’s recent adoption of rules…to facilitate small and start-up companies’ access to capital raised through crowdfunding.”

The resolution supports crowdfunding as viable tools for start-up businesses.

The resolution acknowledges:

Businesses in Michigan have greatly benefited from the opportunities created by the…Michigan Invests Locally Exemption (MILE) program. MILE has allowed everyday Michiganders, referred to as unaccredited investors, the ability to play a larger role in growing Michigan’s creative business ventures through Michigan-based crowdfunding platforms while still enjoying investor protections and security in their investments” (Emphasis added.)

 

Is Crowdfunding a Viable Option in Michigan?

Fast forward to today,  MIBiz recently reported that Michigan’s crowdfunding law hasn’t gained much traction

However, it may remain a viable tool for cash-strapped startups and the Michigan legislature has not given up on it.

 

Yesterday the Michigan House passed HB 4035 that amended the Michigan Invests Locally Exemption to Intrastate Crowdfunding.

 

According to yesterday’s announcement from the Michigan House Republican Website:

The amendments contained in HB 4035 “will expand the program so people can also invest in small businesses primarily doing business in the state and allows Michigan’s law to remain active under new Federal regulations

You can check out the House Fiscal Agency’s Analysis Here

The HB now moves to the Senate Commerce Committee for consideration.

 

Entrepreneurs and Start-ups:

 

Proponents of Crowdfunding: access to capital.

A while back Candace Klein Chief Strategy Officer at DealStruck was Interviewed by CrowdfundInsider and talked about how small business might benefit from crowdfunding. She had this to say, in part:

“Most businesses are community-based, and have an immediate impact for those in their community, whether geographic or industry-based.  Crowdfunding brings these companies together with the everyday investors in their communities.”

 

Crowdfunding for Social Enterprise?

I agree. As I’ve previously written about, crowdfunding appears to be a viable tool for community based businesses.

People are willing to invest in projects that will enhance their local community.

This is what makes local equity-based crowdfunding attractive for social entrepreneurs.

This is what makes local equity-based crowdfunding attractive for social entrepreneurs.

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Fintech Update: Disruption for Good. The OCC’s Remarks Yesterday to Fintech Innovators at LendIt USA in New York

Yesterday, 2015-11-26-13-04-02Thomas J. Curry, Comptroller of the Currency gave remarks about Fintech Innovation at LendIT USA (The Worlds Biggest Show in Lending and Fintech) Conference in New York. You can read Mr. Curry’s remarks here.

Mr. Curry praised the innovative Fintech Companies who “have fueled healthy competition to modernize and improve how the nation’s financial services needs are met.

What I personally like is Mr. Curry’s emphasis on the opportunity Fintech has to reach the vulnerable in our communities.

According to Mr. Curry:

” Financial inclusion…brings those who are unbanked and underbanked into the fold, and too many of those individuals are concentrated in low- and moderate-income communities that are often the most vulnerable to financial difficulty and predatory practices.”

“What’s encouraging about (Fintech)is that there’s good data from the FDIC and others that suggest these communities that have been left out of the traditional system have higher adoption rates for new services that capitalize on emerging and mobile technologies”

 

****UPDATED

Check out the article by Crowdfund Insider  reporting on Curry’s address: “We Will Be Issuing Charters to Fintech Companies

 

Why Fintech Intrigues me – Purpose Driven.

I’ve previously talked about why fintech is so intriguing.

a. taking a risk doing something different;

b. disrupting business as usual;

c. for the good of others.

That’s social entrepreneurship at its finest.

Given the hot water that big banks continue to find themselves in, it isn’t surprising that a consumer friendly alternative is attractive, particularly to the vulnerable communities.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Update on Fintech, Social Entrepreneurship and Special Purpose National Bank Charters for Fintech Companies.

January 19, 2017 1 comment

Last month, Thomas J. Curry, Comptroller of the Currency gave remarks about Special Purpose National Bank Charters for Fintech Companies. You can read Mr. Curry’s remarks here.

Mr. Curry announced that the Comptroller of the Currency (OCC) would move forward with considering applications from financial technology (fintech) companies to become special purpose national banks.

Mr. Curry had this to say, in part:2015-11-26-13-04-02

“Over the past year, no topic in banking and finance has drawn more interest than innovative financial technology, and for good reason. The number of fintech companies in the United States and United Kingdom has ballooned to more than 4,000, and in just five years investment in this sector has grown from $1.8 billion to $24 billion worldwide.

“The OCC published a paper discussing the issues and conditions that
the agency will consider in granting special purpose national bank charters.” You can check that paper out here

Support for Special Purpose National Banks from the Fintech Community.

Today I read an article from CrowdFund Insider: Financial Innovation Now supports the OCC’s charter.

Financial Innovation Now is “a public policy coalition comprised of Amazon, Apple, Google, Intuit and PayPal”

Some heavy hitters.

As reported by Crowdfund Insider, Brian Peters, Executive Director of Financial Innovation Now, stated;

“FIN believes that payments and lending regulation needs streamlining for the modern era. We commend the
OCC’s leadership and vision in driving this regulatory discussion. The OCC has rightly concluded that its approach must evolve to ensure that all American consumers and small businesses are empowered with better access to the benefits of financial technology.”

According to Crowdfund Insider  “Fintech Charter could benefit innovative financial firms that can provide superior services at a lower cost for both consumers and businesses.”

Why Fintech Intrigues me – Purpose Driven.

I’ve previously talked about why fintech is so intriguing.

a. taking a risk doing something different;

b. disrupting business as usual;

c. for the good of others.

That’s social entrepreneurship at its finest.

Given the hot water that big banks continue to find themselves in, it isn’t surprising that a consumer friendly alternative is attractive.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Special Purpose National Bank Charters for #Fintech Companies

December 2, 2016 Leave a comment

Today, Thomas J. Curry, Comptroller of the Currency gave remarks at Georgetown Law School about Special Purpose National Bank Charters for Fintech Companies. You can read the remarks here.

Mr. Curry announced that the Comptroller of the Currency (OCC) would move forward with considering applications from financial technology (fintech) companies to become special purpose national banks.

Mr. Curry had this to say, in part:

“Over the past year, no topic in banking and finance has drawn more interest than innovative financial technology, and for good reason. The number of fintech companies in the United States and United Kingdom has ballooned to more than 4,000, and in just five years investment in this sector has grown from $1.8 billion to $24 billion worldwide.

“The OCC published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters.” You can check that paper out here

 

http://www.dwlawpc.com

e-mail: Jeshua@dwlawpc.com

Categories: banking, fintech, Uncategorized

Big Bank Troubles and Trending Towards Community Banking or Fintech?

November 17, 2016 2 comments

“The so-called Sons and Daughters Program was nothing more than bribery by another name,”

-Assistant Attorney General Caldwell.

Today the Department of Justice issued a Press Release – JP Morgan’s Investment Bank in Hong Kong has agreed to pay a $72 Million Penalty for Corrupt Hiring S2015-11-26-13-04-02cheme in China.

Yikes.

A couple of thoughts:

1. The Department of Justice is out there holding Big Banks Accountable. 

Someone has to. It’s not going to be the average consumer, (Wells Fargo appears to be an exception). It’s also not going to be the small business owner taking out a construction loan. Big Banks have the leverage.

2. Local Community Banks are More Appealing Than Big Banks.

Consumers and businesses alike are looking for banks they can trust. From my perspective, as a lawyer and an adviser to business owners – I am only interested in referring my clients to professionals that I trust.

Looking at the news headlines, an average individual or small business owner might conclude that they need a local banking relationship they can trust.

In West Michigan there are a lot of good local community banks. I know good commercial lenders who care about their business clients.

Does this mean that big banks are going away? Nope.

As its been said – some of the largest banks are simply able t
o offer better deals at lower risks.

Regardless, the headlines certainly give you pause to think.

On the Topic of the value of Community Banks…

Last year Thomas J. Curry, Comptroller of the Currency gave remarks before the ABA Mutual Community Bank Conference in Washington D.C. You can read the remarks here

Mr. Curry had this to say in favor of community-based banks:

“These community-based institutions extend credit to farms and families and local businesses in towns and cities across America, and they serve their customers in a way that large banks just can’t match. They are small enough to be able to know their customers, and they work with them in good times and bad. But they are also large enough to provide the services communities need. Mutual savings associations fit firmly in that tradition”

In further support:

“You are free to do what is best for your customers, and that means you provide services and price those services in a way that puts people first – ahead of quarterly profit targets and ahead of investor interests.”

Those are pretty glowing remarks for community-based lenders.

They are certainly attributes I like to see when I am referring any of my business clients to a commercial lender – particularly a start-up entrepreneurial type client.

Mr. Curry also commented that “big banks”:

“offer a variety of important services to companies and consumers, from commercial loans to credit cards, and they present a number of challenges from a supervisory perspective.” 

I’d say the “supervisory challenge” was an understatement.

 

FinTech Poses Challenges to Community Banking…

[UPDATED] Just today, November 18, Mr. Curry gave remarks before the 11th Annual Community Bank Symposium.  You can read the remarks here.

Mr. Curry notes: “One particular issue testing banks’ strategic risk today is the tectonic shift underway regarding innovation and financial technology.

fintechs have emerged to provide financial products and services through alternative platforms and delivery channels. As of 2015, the number of fintech companies in just the United States and United Kingdom alone had reached 4,000.

Mr. Curry notes:

“One factor in the growth of fintech companies is the 85 million millennials entering the financial marketplace who have demonstrated more willingness than earlier generations to change financial service providers or use multiple providers to meet their needs.”

It’s interesting to note the Trend away from Big Banks – and now to Fintech.

Certainly, millennials will continue to play a large role in the growth of fintech companies like Prosper Loans. Coupled this with the fact that millennials are increasingly attracted to business that does social good – fintech appears to have an advantage with millennials.

Questions? Comments? 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Questions? Comments? 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Lesson for Businesses: “Words Matter.” Court of Appeals Reverses in favor of Bank of America.

July 8, 2016 1 comment

Words Matter.

Contracts are about risk allocation.

In a transaction, who bears what risk?

Back in April I posted on a recent Supreme Court case – Bank of America v First American Title, et. al.

If you recall, that case involved allegations of mortgage fraud perpetrated against BOA to the tune of millions of dollars.

About that Post…

One of the primary issues the Supreme Court was tasked to consider was the legal significance of the closing protection letter (CPL) signed by the Title Company conducting the closing.

Closing Protection Letters.

As the Supreme Court explained, A CPL “is a contract between the title company and the lender whereby the title insurance company agrees to indemnify the lender for any losses caused by the failure of the title agent to follow the lender’s closing instructions.” Id pg 37.

“[a] lender who also wants the title insurer to be responsible for the agent’s acts in connection with escrow closing activities and services must separately contract with the title insurer for such additional protection by entering into an ‘insured closing letter’ or ‘closing protection letter.” Id.

Its About Risk allocation.

Who should bear the risk of a lender’s losses for failure of a title agent to follow the lender’s closing instructions?

In BOA’s case, it was on the hook for a huge loss and wanted to point to the Title Company and say “you should have caught that fraud, you must indemnify me!”

Words Matter.

The Court made a distinction between the inclusion of the word “in” in the CPL in the prior case, and the “exclusion” of the word “in” in the instant case. In the Court’s determination:

“Although the distinction is slight—the only difference is the word “in”—the distinction is legally significant.” Id. page 43.

“[i]f the word ‘in’ is not included, as is the case here, the phrase ‘handling your funds or documents in connection with . . . closings’ simply defines or identifies the closing agent,effectively broadening the indemnification coverage to any acts of fraud or dishonesty by the closing agent related to a closing.” In light of this distinction, the fraud or dishonesty by Westminster or Patriot need not be tied to their handling of Bank of America’s funds or documents.” Bank of Am. v. First Am. Title Ins. Co.id. at page *44 (Mich. Apr. 13, 2016)

Moving on to the Recent BOA Decision…

A few days ago the Michigan Court of Appeals came out with the a related decision in BOA v Fidelity. You can check out the full opinion of BOA v Fidelity National Title.

Similar circumstances as the BOA v FATC case. BOA had alleged mortgage fraud and Fidelity and its affiliates should indemnify BOA for its losses under the CPL.

Words Matter.

The Court of Appeals relied on the Supreme Court in reversing FNT.

In its decision, the Court cited the Supreme Court decision (profusely).

It relied on the Supreme Court’s determination of the CPL’s language (excluding the word “in” as discussed above).

The Court of Appeals reversed the Trial court’s decision in favor of the FNT. It held that  “there is evidence establishing a genuine issue of material fact concerning whether BOA suffered actual loss arising out of the fraud or dishonesty of FTC in handling BOA’s funds….”

Interestingly, the Court goes in great detail to analyze the evidence that supports the allegations of “fraud or dishonesty” against FNT.

Lesson (You get the theme):

Words matter! As the Supreme Court opined – one word can be “legally significant.” It could determine liability for millions of dollars…

In the recent BOA case BOA was on the hook for its losses, and all of FNT’s attorney fees. That judgment was vacated and sent back for trial, based upon the language of the CPL.

Questions? 

Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Working to Build Better Communities: Lending Barriers to Stabilizing Neighborhoods in Detroit.

February 9, 2016 1 comment

Today Thomas J. Curry,  of the Office of the Comptroller of the Currency (“OCC”) spoke at the 2016 National Interagency Community Reinvestment Conference in LA.

You can read Mr. Curry’s complete remarks here.

Mr. Curry acknowledged the many groups and organizations “working to build better communities and improve the financial lives of low- and moderate-income individuals

A question you may want to ask yourself – do you fall into that category? Are you working to build a better community?

Mr. Curry used Detroit as an example of how the OCC is attempting to work through barriers to stabilize low-income neighborhoods.

The OCC had conversations with stakeholders in Detroit that “spurred the OCC to explore how we could clarify existing guidance in an effort to address certain perceived lending barriers.”

Mr. Curry identified market conditions that have “combined to bring mortgage financing to a near halt in Detroit” including:

  • “The limited number of home sales there can make it difficult to find comparable sales needed for valuation of a property.
  • Additionally, area home values may be so low that the cost to purchase a property and make needed repairs often exceeds the post-renovation market value.”

In response, the OCC is putting together a bulletin that “will provide guidance for OCC-regulated institutions that want to set up mortgage programs so that potential homeowners may be able to secure purchase or purchase/rehabilitation loans in excess of the supervisory loan to value, or LTV, limits.”

Its good to know that the federal agency in charge of regulatory certain lenders is trying to find solutions.

Regardless, I think Mr. Curry makes a good observation:  “the best ideas for improving economic opportunities spring from ongoing dialogue among interested parties in the community.”

We all have different opinions as to what we believe the answers are to stabilizing a community like Detroit, or Grand Rapids, or anywhere.

The key is that we all need to be a part of the conversation.

Show up!