Connie Lawson, Indiana Secretary of State Securities Commissioner, Carol Mihalik

In the balance… Investor Protection, Entrepreneurship, and Emerging Issues

 The Secretary of State; Elections Division, Business Services Division, Dealer Division and the Securities Division  The Securities Commissioner appointed by the Secretary of State  The Securities Division is tasked with investor protection and maintaining integrity in the marketplace  The attorneys and investigators are police officers A Review of the Basics

 All securities products sold in Indiana must be registered with us unless there is an exemption. (Notes, stocks, bonds, investment contracts, etc.)  Anyone who directly or indirectly offers or sells a security must be licensed Licensing and Registration

Cybersecurity Clients with Diminished Capacity Succession Planning Fiduciary Accountability Emerging Issues

{{ Investor Alerts Survey responses Cybersecurity

{{ NASAA Model Rule Elements Indiana Guidance only Succession Planning

{ Diminished Capacity Privacy POA Asessment Protections APS Protecting investors and brokers

Fiduciary roles

What’s new and creative in securities and capital formation… Crowd ‘vesting’ Internet Solicitation

{ CROWD CAPITAL A look at two State and Federal changes in offering securities and raising funds

Anyone can buy public stock (Schwab, E-Trade, broker) Private non publically traded offers have been limited to accredited investors that you know

The JOBS Act: Equity Crowdfunding (passed July 1, 2012) SEA 375 Crowdfunding, Invest in Indiana Exemption ( Our state’s response ) effective July 1, 2014 Emerging laws and rules

506 (c) now allows for general solicitation to accredited investors using the internet JOBS Act Title II

Realty Shares – Buildings Mainstreet – Assisted living, nursing homes Mainstreet – Assisted living, nursing homes OurCrowd –Israeli investment opportunities Fundrise – the World Trade Center Websites in the news

{ As Federal crowdfunding not yet operational States sought their own solutions. Ours is Invest in Indiana Crowdfund Exemption Ind. Code § (27)

Offer and purchase must arise out of and take place in Indiana among Indiana residents Indiana Presence

Flat fee Subject to audit Scrutiny of offeror and the issue Money to escrow service company Communications portal Record keeping The Indiana Internet Website Operator

An issuer can obtain up to $1,000, through this mechanism without audited financials; $2,000, with the prior years audited financials being made available to investor and Commissioner. A non accredited investor may invest up to $5, per offer. An accredited investor has no limit Caps Caps

The Indiana non-accredited investor now has access to certain exempt private offerings via the internet. The Indiana business now has a new source of capital at $5, per investor.

ENFORCEMENT

{ What is a security? Someone promises to do something with your money while you sit back and await the expected returns. One word helps ; Passivity

Criminal – with referral to County Prosecutor Unlicensed broker Unlicensed broker Unregistered product Unregistered product Material misrepresentation Material misrepresentation Enhanced Level 4 penalty for > age 60 or affinity fraud Enhanced Level 4 penalty for > age 60 or affinity fraud Administrative Adjudications Ability to impose consequences “in house” Ability to impose consequences “in house” Civil – OAG serves as counsel Fraud and receiverships Personal cause of action/ Victim personal counsel How do we deal with bad actors?

They usually start like this… Marcus Schrenker of Hamilton County

If the issuer, in the offer or sale of the securities, makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements … not misleading, In other words … “had they told me the truth (i.e. not registered, how they would really use my money, etc.) about XYZ, I would not have invested” Material Misrepresentation / FRAUD 26

Creative real estate … Charles Blackwelder, Hamilton County Sentencing April 2, 2015

But end like this… Vaughn Reeves of Sullivan County

A failed or money losing business does not mean laws have been violated

Indiana Secretary of State Connie Lawson Thank you!! To learn more about the office visit the SOS Website Or call Securities Division Securities Fraud Report Hotline Fax Number