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  • Writer's pictureNicolas Morgan

The Ticker Tape: Issue 4

Spring 2024


Bringing Transparency to the SEC’s Damaging Pattern of Overreach

Welcome to the latest issue of the Ticker Tape, the quarterly newsletter of Investor Choice Advocates Network, the organization dedicated to pushing back against the overreach of the Securities and Exchange Commission (SEC) and serving as a legal advocate and voice for small investors and entrepreneurs whose efforts are too often stymied by the actions of the SEC.

This month’s issue is packed with stories about real people who have been ensnared by the SEC’s predatory regulation-through-litigation approach. You can learn how ICAN and our nationwide network of allies and supporters are helping these average Americans fight back against the government behemoth and, in the process, erecting and strengthening a growing legal bulwark to restrain the SEC.

You’ll also read about those who are striving to enhance market access opportunities for all despite the regulatory barriers. 

ICAN supporters make our work possible. If you share our commitment to defending investors and entrepreneurs from an overzealous SEC, ensuring market access for all, and corralling the SEC’s unwieldy powers back within their rightful boundaries, I hope you’ll consider joining our efforts. Please forward this newsletter to those you think may also be interested in ICAN’s work and share our stories on your social media feeds. Connect with us online. And please consider donating.

As always, you can find past issues of the Ticker Tape and more on our website

Litigation Updates

With its lopsided litigation resources and advantages all but guaranteeing settlements, the SEC has benefited from having its conduct shielded from impartial judges and the public eye far too often. Because of its practice requiring defendants who settle to agree to what amounts to a “gag order,” there is virtually no transparency in well over 90% of the actions the SEC takes – because settlement requires silence. 

So, what happens when people fight back and the SEC actually appears in front of a federal judge rather than one employed by the agency itself? The answer, lately, is that the regulatory agency has found itself the recipient of stinging rebukes. Below are a few examples, including one involving ICAN's first client: 

SEC v Punch TV

In February, we shared with you a spotlight on ICAN’s first client, Joseph Collins of Punch TV. After taking advantage of a brand-new crowdfunding opportunity and self-reporting an unintentional technical violation of a registration requirement, Joseph found himself buried in litigation with the SEC, which referred to him as a “recidivist,” implying criminal behavior despite no allegations of fraud or harm. 

The Punch TV case illustrates an all-too-common experience of everyday business people who find themselves the targets of an avaricious federal agency with endless resources. These confrontations too often continue until the person or business has exhausted their financial resources, is unable to continue the fight, and is forced to accept an SEC-dictated settlement that gives the federal agency another precedent-strengthening “win.” Though having fought valiantly for years, even after losing his original counsel when he could no longer pay them, Joseph was on the path to having to accept a ruinous settlement over a technical infraction until ICAN, with the support of our generous donors and legal allies, was able to step in and halt the government steamroller.  

Joseph was initially scheduled to finally have his day in Court in March, an opportunity to challenge the SEC's motion for an order that would have required him to pay $1.6 million in penalties and disgorgement. However, after reading ICAN’s brief, and recognizing that Joseph and his company were no longer an easy mark, the SEC asked for, and received from the Court, an additional 30 days to reply to ICAN’s brief.

When the SEC finally filed its reply brief, it improperly included more than 150 pages of new documents as well as new affidavits from SEC staff members. Leading up to the rescheduled hearing, ICAN and ICAN Legal Network co-counsel Ed Totino of Baker & McKenzie filed an objection to the SEC improperly trying to introduce late evidence to shore up the defective motion, and we served a motion for sanctions against the SEC for making misrepresentations to the court about the presence of investor "pecuniary harm."  

On April 12th, the Central District of California Court conducted a hearing about Joseph’s case. While the judge has taken the matter under submission and has not yet issued a ruling, the judge told the SEC attorney he was troubled that Mr. Collins had been litigating without counsel with "both hands tied behind his back" until he was represented by his current "able counsel."

No legal outcome can be guaranteed, but thanks to ICAN, Joseph has had his day in Court and a fair hearing with “able counsel” at his side—counsel with the experience and expertise to stand up to the SEC’s bullying and challenge the regulatory body’s questionable win-at-all-cost tactics.

SEC v. Debt Box

Back in December, Brent Baker, who represented Debt Box, was our featured guest on ICAN’s SEC Roundup. This company was subjected to a restraining order and asset freeze that completely halted its business, which the SEC obtained with deliberate lies. In March, the Judge in the case sanctioned the SEC after finding that the agency intentionally misled the court to get approval for the temporary restraining order and asset freeze. 

Last month, the federal district court judge issued a scathing 80-page order sanctioning the SEC. From the judge’s order:

“The SEC's conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process.” 

If the SEC feels so emboldened to lie to a federal judge, what happens when no federal court judge can scrutinize the SEC’s conduct, in settled cases where defendants are bound to remain silent about their side of the story, or in administrative proceedings presided over by SEC employed administrative law judges overseen by the SEC Commissioners for purposes of appeal?

Finally, in one of our newest cases, ICAN is helping to bring to light yet another egregious example of SEC overreach:

SEC v Schueler

On April 15th, ICAN provided pro bono counsel to the nonprofit PulseChain Foundation, filing an amicus brief in SEC v Schueler, which you can read here.  (In taking on the case, we worked with ICAN Legal Network co-counsel Kayvan Sadeghi at Jenner & Block on the filing. We also appreciate the help of Marlon Williams, who acted as the point person for PulseChain.  Hear from Kayvan and Marlon here.)

This case brings about a new “flavor” of absurd overreach where the SEC has named software as a defendant. A quote from our brief:

"You can’t sue the sidewalk, or a piece of software.  This case marks an unprecedented departure from the SEC’s already-expansive approach to crypto enforcement actions, by naming as defendants a blockchain token, a blockchain network, and a protocol deployed on a blockchain network. All three are software."

Without ICAN’s engagement, the voice of the PulseChain community would not have been heard by the court.  For obvious reasons, the software named as defendants by the SEC are not represented by counsel, and the harmful impact the SEC’s case will have on the users of that software – the PulseChain community – would not have been brought to the judge’s attention.

When it comes to creating a bulwark to restrain the SEC, stakeholders in the economy must make their voices heard with legal representation for any change to be made. While not every defendant or non-party fighting back will need ICAN’s representation, filing amicus briefs with the cooperation of our network is an imperative part of our strategy. 

Change Makers

The SEC’s counterproductive behavior extends to policy-making, too, but there are trailblazers who are determined to expand market access for everyday investors despite the challenges. ICAN’s Capital Ideas video podcast series is designed to highlight these entrepreneurs, investors, and other practitioners and their often creative efforts to overcome onerous regulatory barriers.

Why are their efforts so important? Increasingly everyday Americans are missing out on the opportunity to put their money to work, as investment opportunities shrink for all but the wealthiest. In this section of our newsletter, we’re focusing on the change makers who are trying to combat the limitations presented by the SEC’s definition of an Accredited Investor and the doors that shut to investors who do not meet its extreme wealth or income requirements. 

As the number of publicly traded companies continues to decline, the SEC - in a misguided attempt to “protect” investors and entrepreneurs, is ignoring years of demands from both sides of the aisle to expand access to America’s capital markets. While the SEC congratulated themselves in 2020 for “modernizing” the Accredited Investor Rule, the changes lacked substance for ordinary Americans. 

The individuals we spoke with for our series, and highlight below, bring to life the damage of this outdated policy as they share their unique perspectives and the work they are doing. Through their eyes you’ll see how the ill-advised “protection through prohibition” approach taken by the SEC stifles access to wealth-building for regular investors at a time when many are concerned about a growing wealth gap. At the same time, small businesses responsible for the majority of the jobs created in our country are continuously limited in how they can raise the capital needed to launch or expand new efforts. 

Dar’Shun Kendrick 

Dar’Shun is a securities attorney, business coach, investment advisor, and Georgia state representative. She joined us on a recent episode of our Capital Ideas series to discuss the challenges of raising capital in today’s environment.  

Working with so many small businesses, Dar’Shun highlighted the need for reforming the accredited investor rule to consider criteria other than wealth—such as professional experience or expertise—which would bring more balance and inclusion. She highlights the disproportionate amount of tax breaks that are available to accredited investors. 

When it comes to policy reform, Dar’Shun encourages a proactive approach that creates a better environment for start-ups. 

Chris Nanda

Chris, the Senior Director of Growth Tech at Fundrise, also sees SEC regulations preventing ordinary people from obtaining the same returns and opportunities as the wealthy. 

During our recent interview with Chris, he highlights a sobering statistic about IPOs. Noting that in the 1990s, the average IPO was a 7-year-old company with about $50 million in revenue, and now the average IPO is a 12-year-old company with $200 million in revenue, Chris makes the point that the burdens of going public are causing investors to miss out on key periods of growth for these companies. Without these companies being public, and the accredited investor wealth requirements, opportunities for large returns are often unavailable for the everyday investor. 

In the podcast, Chris discusses the technology and work that has gone into Fundrise’s mission to democratize access to real estate and other investments that have traditionally been unavailable to most individuals. He cites the extensive legal investments that go into their offering as a barrier to more opportunities for consumers. 

Rebecca Kacaba

Rebecca is the CEO and founder of DealMaker and is on a mission to make online capital raising mainstream. She joined us for a discussion earlier this month, and it won’t surprise you that she also cited the accredited investor rule as a problematic issue. 

Highlighting the wealth gap as a major issue facing society today, Rebecca sees reform of the rule as a way to narrow it. Citing the need for capital from the majority of businesses that hire employees and the fact that 63% of jobs are at small businesses, improving funding access would fuel job growth. More job opportunities and more investment opportunities would be a win-win for building wealth. 

We also discuss some of the great results Rebecca has seen for companies using Regulation CF, the need for balance with regulation so that costs don’t make funding prohibitively expensive, and much more. 

Wrapping Up

The network of people fighting for real change to bring the SEC back to reality and working to expand opportunities for all investors is growing every day, and ICAN is honored to take a leading role in these efforts. 

If you’d like to support our work, please consider:

  • Sharing all or a part of this newsletter on social media, or

  • Forwarding this newsletter to someone who might be interested in any of these topics, or

  • If you’re a member of the press and are covering a story where ICAN could contribute a comment or information, please reply to this email.

  • And last but certainly not least, consider donating to help us bolster our legal advocacy fund for small businesses and investors. Please reply to this email to discuss a donation, or click here

With thanks, 

Nick Morgan

Founder and President of ICAN

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