Lets use technology simplify another complicated problem.
In a Reg A+, 506(c) or other type of offering, the issuer can sell securities directly to investors. This greatly enhances marketing & sales, reduces transaction friction, simplifies investor relations and makes it easier on everyone in the group (issuers, broker-dealers, platforms, etc).
The vast majority of investors, in my experience, want to have a direct relationship with the issuer. They invested out of passion and because they believe in the company, not because they want to trade on a quick stock price pop.
However, some (not a lot, but some) investors…such as in a Reg A+ offering that goes up on OTC…may want to have their shares delivered to their brokerage account. These people don’t want to open a new brokerage account somewhere, they just want them delivered to their existing Schwab, Etrade, Fidelity, Wells Fargo, etc account.
How is this done? Via what’s called Deposit and Withdrawl at Custodian (“DWAC”). In short, the investor tells their broker that they own some DTC-eligible securities that they just bought (e.g. Elio Motors) and they want them in their brokerage account. The broker, as a DTC full participant, then enters this into the DTC FAST system, which send a message to the issuers SEC registered transfer agent (also a DTC member) to change ownership from the investors name to the brokerage firms street name (for the investors account there). This take almost no time to do.
Problem: for an investor to communicate this to their broker requires language they do not speak, and will result in both the investor and the broker going in circles trying to get things correct. Frustrating at best.
Solution: we are excited to announce that this morning we pushed “DWAC automation” live to simplify this for everyone and ensure securities can be moved easily and quickly. Both for Invest Now and API integrated customers of FundAmerica. At closing our system will automatically send an email with an attached .pdf letter that the investor can simply print, sign and send to their broker. It’ll have all the data on it (which is a lot) and in the language/terminology they need to post in the FAST system. Easy. This is available for all DTC-eligible securities right now.
For more information please reach out to anyone at FundAmerica and we’ll be happy to show you how it works. We make Reg A+, 506(c), EB-5, 4(a)(6) and other offerings frictionless with our technology and back-office compliance services.
P.s. Wait a minute, am I saying that 506-D, Reg S and other securities can be DTC eligible? Yes! Read 2.(iii), first paragraph of the DTC eligibility requirements