Tampa, Fla. -- When Greg Yadley isn’t at the office, he’s likely to be found among friends, enjoying a glass of wine or discussing his recent teaching expedition to Poland. The Tampa-based corporate attorney and partner with Shumaker, Loop and Kendrick, LLP is a reputed wine aficionado, particularly for his knowledge of Burgundy wine, with a soft voice and professorial demeanor befitting his other role as an adjunct law professor at the University of Florida. At first glance, it’s not instantly obvious that he is also enormously influential in determining how people invest in small businesses in the U.S., or the extent to which private companies may soon be able to raise capital through crowdfunding.
The U.S. Securities and Exchange Commission (SEC) has long dictated how private companies advertise and solicit investment opportunities. “Generally, if you’re going to do a private offering, you can’t solicit or advertise for investors,” explains Yadley. “Conceptually, this is a good idea and certainly made a lot of sense pre-Internet. But now a company in Tampa can reach investors anywhere in the world and it doesn’t cost them any money to advertise it on the web. So, why not let people take advantage of technology and let them tell their story online? The focus really ought to be on who buys those securities or shares of stocks.”
Recognizing the need to revise many antiquated rules, the SEC formed the Advisory Committee on Small and Emerging Businesses in 2011. Yadley was one of 21 people, and one of only three lawyers, selected to serve on the committee tasked with consulting with the SEC about interests and priorities of small businesses and public companies, including how they raise capital through private placements and public securities offerings.
“We try to give good advice on how the Securities and Exchange Commission can make it easier for smaller companies to both raise capital and, if they’re publicly held, ensure they are not subject to cumbersome regulations, which may be important for General Electric or Bank of America, but not for small companies,” said Yadley.
Some of the committee’s advice has already become law, including its recommendations on general solicitation, which were included in the Jumpstart Our Business Startups (JOBS) Act signed into law in April 2012.
As a result, it is now permissible for small companies making a private offering to solicit “accredited investors”, meaning those with an annual income of $200,000 or more or a net worth of at least $1 million, excluding the equity in their home.
"The premise is that anyone with that level of income or wealth has the experience or the ability to protect himself or herself by hiring a lawyer or financial advisor to help them decide, or to decide on their own, whether to make an investment or take a risk,” said Yadley.
Rules governing how private companies utilize crowdfunding, which was also legalized by the JOBS Act, have been a point of discussion and debate among members of the committee.
Online crowdfunding websites began to appear as early as 2001. The launch of Kiva.org in 2007 spurred the popularization of online microcredit crowdfunding by making it easy for people around the globe to give small business loans to people in developing countries. For $25, anyone with an Internet connection and a credit card could make a short-term, interest-free loan through Kiva.org to a shopkeeper in Rwanda or a farmer in Guatemala with minimal financial risk.
Over the years, crowdfunding has grown increasingly popular and similar “donation only” websites, such as Kickstarter, IndieGoGo and Citizinvestor, have become popular places for individuals, non-profits and local governments to raise money online. However, despite their popularity, crowdfunding websites dedicated to helping private companies, startups and entrepreneurs raise capital have been slow to take off because the SEC has yet to decide on how to regulate them.
Last month, the SEC issued to the public a set of proposed rules on crowdfunding which would permit small businesses to raise up to $1 million a year from unaccredited investors through approved funding portals. During this period, investors with an annual income or net worth of less than $100,000 would be able to invest up to $2,000 or 5% of their income, whichever is greater, and those with an annual income or net worth of $100,000 or more would be able to invest up to $100,000 or 10% of their income.
The advisory committee has yet to endorse the proposed rules, and the public still has several months to respond to them, but Yadley is excited about playing a role in the process and having a place on the committee, which the SEC recently extended for another two years.
“These are cutting-edge issues and I get to have a say, which is pretty remarkable,” said Yadley.
With the reality of crowdfunding as an investment tool inching ever-closer, Yadley’s advice to first-time investors is no different than his advice to novice wine drinkers: “Trust your own judgment about what you like and seek out the advice of those who know something about it.”
Gregory C. Yadley is a partner with the law office of Shumaker, Loop and Kendrick, LLP and co-chair of the firm’s corporate practice. He has extensive experience representing business entities of all sizes, including closely-held and family businesses and large and small public companies. He regularly represents these clients in financing transactions, mergers and acquisitions, contract negotiations and disputes, strategic planning, legal compliance and general corporate matters. Greg also has extensive experience in securities matters, including advising clients with regard to their private and public offerings of securities (including initial public offerings) and their ongoing disclosure obligations. In addition, he is an adjunct professor at the University of Florida Levin College of Law, a member of the U.S. Securities and Exchange Commission's Advisory Committee on Small and Emerging Businesses, Co-Editor of The Florida Bar Florida Corporate Practice Manual, Principal Chair of the annual Federal Securities Institute and Chairman of the American Bar Association's Middle Market and Small Business Committee.
Founded in 1925, Shumaker, Loop & Kendrick, LLP is a full service business law firm with more than 225 attorneys practicing in Toledo and Columbus, Ohio; Tampa and Sarasota, Florida; and Charlotte, North Carolina.