RiskSharingPassiveReturn
Contents
- 1 Problem
- 2 Purpose
- 3 Criteria for checking the Sincerety of new Entrepreneural Offers
- 4 Brainstorming section
- 5 Author credit
- 6 Discussion
- 7 Actual and potential Support for the project
- 7.1 Legal Experts already involved for a relevant Pilot Project
- 7.2 Potential support from Catherine Austin Fitts
- 7.3 Potential support from non legal Experts
- 7.4 Invitation to a novel Division of Dow Chemical
- 7.5 Cooperative Attorney and hopefully by a Bigger Number of Wikizens
- 7.6 Where are the NetworkWeavers g ?
- 7.7 Advice of Ward Cunningham
- 7.8 And what about Dow?
- 7.9 OpenBusiness Initiatives
Problem
Assume you read a posting on the internet, about a project, perhaps needing a million dollars to execute, that for whatever reason gives you motivation to contribute some of your money, with the expectation of getting some money back, that is in excess of your original contribution.
This dynamic has potential to gain execution of more projects that are expensive and involve high risk, by having many average folks, typically contributing less than $100, share in the risk.
Today it is illegal to make such project postings to the general public on the internet, because they involve the contributor having potential to make a passive return on their investment.
The SEC views such Internet postings as ripe for many scam artists to create “give me your money and I’ll make you lots of money” postings, that could create hardships for people having little financial sophistication, when the scam artists steal their money. The downside is these existing SEC laws are preventing financial risk sharing by large numbers of people, having good intent.
Purpose
Develop a List of Safety Procedures
To break this barrier it is proposed to develop a list of special procedures, that must be followed, by anybody wanting to make such posting.
Develop a List of Self Policing Methodologies
It is also proposed to develop a list of methodologies that can make this system self policing, to prevent the bad apples from corrupting the new system of money pooling/risk sharing.
Seeking an adequate "legally recognized" exemption status
It is then proposed to give these lists to lawyers with expertise in SEC, cooperative, business, and cyber law, so that they will add their credibility and expertise, then send the resulting suggestions to the SEC, in hopes of gaining a new “legally recognized” exemption, or new classification of investor, to enable such postings to be made “legally” on the Internet.
Preventing the Worst case
It is suggested that we do not approach the list from the attitude that humans are inherently good people, and thus with enough carrots built into the system, there will be little or no fraud. I suspect the SEC will view that attitude as naive. In contrast to assume the worst case human behavior, and then figure out ways to check or prevent it.
Assuring Honest Effort
People making such project postings have potential to raise lots of money. In return they should expect to put in some effort and “pain”. In other words there should be procedures to follow and hoops to jump through. However they should not be expensive, because that would exclude too many people from making a posting.
Criteria for checking the Sincerety of new Entrepreneural Offers
A straightforward Hoop, that doesn't scale
“Who are you?” If I give you my money, I want to know who you really are. One way to do this is to hire a good private investigator to dig up the skeletons in ones closet. However that does not scale well, and is expensive. What other ways to prove who you really are?
Other hoops that might scale
Public Assessment/Vouching by Independent Renown and Trusted People
a) If you have projects with big social or other upsides, then it is not unreasonable to expect that you did not just think of this yesterday, but rather have been working on it for some time, and in such activity you have come into contact with others. Have these “others” vouch for you, in a transparent way on the Internet. If these “others” are your brother or somebody I can’t verify, that is not likely to help you. In contrast if it is a teacher, an attorney, a scientist, a non profit director, the pastor of your church, a well known community leader, etc. – then you gain more of my trust.
Disclosing Identity in a reliable way
b) Tell me where you live, so if something goes wrong I can find you. If you have only a mailing address, or a boiler room operation, don’t bother making the posting. Some might argue, “but this will leave me open to having strangers find me, when I have done nothing wrong!” That is the “transparency” price you must pay in exchange for the opportunity to raise large amounts of money.
Other things that might be done:
Care for Extreme Financial Transparency
1. Agree to, and implement, “extreme” financial transparency. The community should develop these transparency standards. The point is if one gets money, the flow of that money should be easily viewable by the public, at any time.
Minimize the investment needs
2. Agree to ask for no more than a smaller amount of money, for example less than $100, from an individual. The point of this new system is enabling small contributions rather than large. If you want to solicit $100k from a deep pocket, there are already procedures to solicit “accredited” investors via the Internet, that will not have the SEC breathing down your throat.
Balance Carrots and Stick
What is the carrot? The carrot in this system is that people making postings have potential to raise lots of money from the public, also potentially quickly.
What is the stick?
Brainstorming section
The stuff of moved to RiskSharingPassiveReturnBrainstorming.
Author credit
This page was created by MartinPfahler and subtitled by fridemar 02:31, 5 August 2007 (PDT)
Discussion
PeerInvest
Sam: Just wanted to leave some quick feedback that I think this is interesting. I also wonder if it is not already legally possible for people utilize for-profit cooperative or corporate structure to accomplish the same thing this article talks about, without having to beg the SEC for an exemption? This is similar to an idea I'd been rolling around in my head, and had posted here about a year ago: http://socialsynergyweb.net/cgi-bin/wiki/PeerInvest --SamRose 19:52, 7 August 2007 (PDT)
FourTypesOfInvestingForCooperatives
Martin: Sam, thanks for your input! With some attorneys (experts in cooperative and SEC law) I currently brainstorm with, we are talking about three different types of potential people that could pitch their money into a virtual pot, and also be part of a for profit cooperative, so that any financial gains made by the cooperative could be divided amount the members: Enabling all three types, to pitch into a virtual pooling pot, can fill the pot faster, and likely with more money.
Active Investing as PeerInvest in an OpenBusiness
Fridemar: Welcome Sam for joining the conversation. I think, with your PeerInvest g concept you open up a fourth source of RiskSharingReturns g , we can name RiskSharingActiveReturns g in the context of our conversation. The peers take actively part in a (not necessarily non-profit) organisation, paying fees, making pledges or even donate for the service, so that they can expect revenue returns, in case their project succeeds. As an OpenBusiness all work and transactions of the organization are continuously monitored in public. Martin, could you discuss this with your attorneys too? As a convenience I am starting a WikiTrail, named PeerInvestTrail, so that we can comfortably traverse the material, connect it, comment it and automatically inviting new collaborators.
(thumb doesn't appear to work, please help)
If you already have the TrailFireFoxPlugin installed, you can automatically see the annotation mash starting on this page, otherwise try this link to the first annotation.
InvestingForResults
Martin: a) type 1: This person (has no deep pockets and) contributes money because they want to use the results of a project themselves. For whatever reason they are motivated to contribute only with this upside.
Fridemar: I inserted the parentheses, to include benevolent sponsors (philantropists).
InvestingForResultsAndMoney
Martin: b) type 2: This person is just like type 1, with one important exception. They are not motivated enough to contribute their money, unless the project offers some type of passive investment stream (cannot guarantee it, but offers it).
InvestingForMoneyOnly
c) type 3: This person is a deep pocketed accredited investor. This person seeks only passive return and does not intend to personally use the results of a project.
Soliciting InvestingForMoneyOnly needs Legal Prerequisites
On the Internet one can already solicit the type 3 person legally. The gist of the process the target person must be an
* Accredited Investor: - which is a fancy word for saying one has high wealth, such as over a million dollars. They also use the term "sophisticated investor", here the implication is that they assume one of low wealth is more easily cheated by scam artists. then * By Priviledged Access only: i.e. by a process such as a secret password, by which this person can gain access to a project posting, where a passive return is being offered.
Martin: Fridemar, the term used by the SEC is "accredited investor" or "sophisticated investor"...
SEC definition of accredited investor:[[1]] Iv terms of a person note it states this person must be:
- a natural person who has individual net worth, or joint net worth with the person�s spouse, that exceeds $1 million at the time of the purchase;
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
Info about soliciting accredited investors via the Internet: [[2]]
What are NoActionLetters ?
Martin: The SEC web site has lots of related information, also see "no action" letters. These are letters produced by the SEC after they review a new process mode, that in effect says, "we promise not to sue you if you try this new mode of dealing with money" - which is what folks trying new "stuff" want to see before they invest lots of time and money. For more information see this section of the SEC web site [[3]]
Soliciting InvestingForResults is Legal
Martin: One can solicit the type 1 person with a project posting legally, because one is not offering this person money in exchange for their contribution, rather some type of other tangible resulting from execution of the project.
Soliciting InvestingForResultsAndMoney is Illegal
Today it is illegal to have a posting for the type 2 person, where one is offering the potential upside of passive revenue - it is against SEC regulations. This is where our attorneys are currently brainstorming to gain a novel legal mechanism or SEC exemption, etc. MartinPfahler
Actual and potential Support for the project
Sam: Martin, have you had any response from the SEC so far? --SamRose 08:31, 8 August 2007 (PDT)
Legal Experts already involved for a relevant Pilot Project
Martin: Sam, we are not yet that far. If a “non attorney” tries to get action out of the SEC the chances are it gains less serious attention than if presented by relevant legal experts. And such legal experts that we have involved, are not going to spend that time and effort unless they see some potential funding for a relevant pilot project.
Potential support from Catherine Austin Fitts
Sam: Hmmm...I have to disagree. I believe that if inquiry methods were organized in the right way, it is plausible that enough legal experts would pool their knowledge and collaborate towards creating a framework that is legal, even without compensation, but for the greater good. One definitel legal expert who would likely be available to put time into this is Catherine Austin Fitts, among other people. She's already created some frameworks in the form of http://solari.com.
Fridemar: Sam, for organic growth of this page and easier edit access to each conversational unit , I inserted section titles, inviting new participants to join our non-linear wiki-conversation. Let's find and motivate as much support as possible for the common benefit ...
Potential support from non legal Experts
Sam: Furthermore, I sincerely believe that it is possible and plausible that non legal experts shall be able to formulate, organize, and establish and fund the existince of for-profit micro-investing frameworks. In particular, I am personally interested in this existing framework: http://www.sec.gov/investor/pubs/invclub.htm Because, I think that it can help people build up the trust among each other that is going to need to exist to be able to pool money and invest. As far as projects seeking funding goes, I think that it is pretty inexpensive to establish yourself as a private company, LLC, or other legal entity and sell shares, even in small amounts. This infrastrcture already exists, unless I am missing something that you are talking about here?--User:SamRose 12:07, 19 August 2007 (PDT)
Invitation to a novel Division of Dow Chemical
In such regard in mid September I have been invited by a novel division of the Dow Chemical Corporation (a division that is very interested in these issues), to further explain a pilot project proposal that involves this type of risk sharing, and that would enable people to interface with Dow under a novel for profit umbrella.
Fridemar: Such a project needs a lot of support to prosper. What kind of support is on the way?
Cooperative Attorney and hopefully by a Bigger Number of Wikizens
Martin: A cooperative attorney will also join me in this effort. After this, we will have a better read on Dow, and if positive, the involved legal experts will likely contact the SEC. At this stage, after meeting with Dow in Sept, I would sure like to have more than you, me, and Fridemar in this brainstorming discussion – rather I’d like to show Dow executives there is a Wiki space filled with hundreds or thousands of people with this topic interest (big corporations like Dow are not impressed when they see just three people off in the corner – they want to see bigger numbers of people).
Fridemar: To get a bigger number of Wikizens activated, it would be helpful to get some opinion leaders involved. Did you try something like this? (I wouldn't have asked you this, if this wasn't a wiki, where everyone can make a "vaticinium ex eventu", i.e. be a good prophet :-)
Where are the NetworkWeavers g ?
Martin: Fridemar, to do as you suggest one must know who the Wikizens view as opinion leaders, which I don't know. I view that as a task for folks that are much better versed in Wikizen communities than I am - where are all those network weavers when one needs them? MartinPfahler
Fridemar: Martin, just a minute. I am looking for the page and leaving them a link to this section :-) Here I am back, offering you and all other peers the incentive of WeaversWanted#Call_for_Help_List
Advice of Ward Cunningham
Martin: Also I talked over the phone today with Ward Cunningham (who is now with aboutus), about the possibility of having this effort, at some later stage of evolution, tie into aboutus. Ward as usual gave me some excellent advice and input. Some of this issue revolves understanding that aboutus has early stage risk investors that want to see a certain aboutus focus, which might not align with this risk sharing/cooperative forming focus - but then again it might - perhaps through some type of aboutus TOPSOIL integration (after aboutus further develops TOPSOIL.
And what about Dow?
Fridemar: And what about your contacts with DowChemical ?
Martin: In any case first I try to gain some more tangible results with Dow, that might help push this focus forward. MartinPfahler
OpenBusiness Initiatives
Fridemar: Sam, it would be great, if we could integrate as many activities as possible in the OpenBusiness scene. As you are an expert in this domain, it would probably make a lot of people happy, if you and y/our peers could help to co-build the above WikiTrail, because the material you overview appears to me meanwhile mind-staggering. Which of the next links of your initial link are the most important ones in your view? Instead of reorganizing your first linked page (and the successor pages, what is not appropriate), it appears to me much more convenient to visit this page with (one ore more) TrailFire annotations, that can grow organically and at last comfortably be traversed like a diashow.
|
fridemar 16:58, 8 August 2007 (PDT), publishing the discussion on the SocialCommonWealth blog, accessible by the PermaLink risksharingpassivereturn-discussion , where you can amplify the initiative by clicking the CommunityConnectorButton there. Doing it empowers the movement for the Commons. |