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Arcimoto & NASDAQ: A New Paradigm for Reg A

Today marks a watershed moment for the Reg A industry

CEO and Chief Trust Officer, Prime Trust

Scott Purcell is the CEO and Chief Trust Officer of Prime Trust, the technology-driven trust company. His firm provides custody, trustee, escrow, AML, KYC, payment processing, accounting, and compliance for numerous OTC desks, exchanges, stablecoins, platforms, broker-dealers, investment advisers, portals and others who are building businesses that are changing the world. Prior to forming Prime Trust, Mr. Purcell founded FundAmerica, a financial technology firm providing software and back office services to banks, trust companies, broker- dealers, investment advisers, securities exchanges, SEC registered transfer agents, and large issuers (primarily real estate companies). He is a founding Board member of the Crowdfunding Intermediary Regulatory Association (CFIRA) the “Industry Best Practices for Funding Portals” and “BD and Registered Portal Regulatory Mechanics”. He also started a fixed income trading firm, a clearing broker for institutional investors and published a book “The Guide to Fixed Income Investing”.
Scott Purcell is the CEO and Chief Trust Officer of Prime Trust, the technology-driven trust company. His firm provides custody, trustee, escrow, AML, KYC, payment processing, accounting, and compliance for numerous OTC desks, exchanges, stablecoins, platforms, broker-dealers, investment advisers, portals and others who are building businesses that are changing the world. Prior to forming Prime Trust, Mr. Purcell founded FundAmerica, a financial technology firm providing software and back office services to banks, trust companies, broker- dealers, investment advisers, securities exchanges, SEC registered transfer agents, and large issuers (primarily real estate companies). He is a founding Board member of the Crowdfunding Intermediary Regulatory Association (CFIRA) the “Industry Best Practices for Funding Portals” and “BD and Registered Portal Regulatory Mechanics”. He also started a fixed income trading firm, a clearing broker for institutional investors and published a book “The Guide to Fixed Income Investing”.

Image via Oregon Department of Transportation/Wikimedia

Today marks a watershed moment for the Reg A industry as Arcimoto, led by WR Hambrecht + Co, successfully closed their offering and begins trading on NASDAQ tomorrow.

The Problem:

Although most Reg A issuers have no intention of immediately trading their shares on a national exchange, the very real problem for issuers who do want to list on OTC, NASDAQ or NYSE is how to combine a traditional broker-dealer selling syndicate with a direct-to-the-crowd sales model without requiring direct investors to suffer the friction of opening brokerage accounts.

A New Paradigm:

The coalition of Arcimoto and its service providers have finally figured this out and solved the problem. From now on future Reg A issuers and their broker-dealers will be able to easily and in compliance conduct Reg A IPOs with no requirement that direct investors open brokerage accounts or worry about how to sell their shares (and with no DWAC needed).

How? Using the Arcimoto template…

  1. The underwriter, WR Hambrecht + Co, led and was the book-runner for a traditional broker selling syndicate, with a single DTC closing and settlement handled by the escrow bank, Prime Trust.
  2. The issuer then placed FundAmerica “Invest Now” buttons on their website, on the brokers website and on Manhattan Street Capital’s website, with all orders tagged and tracked. This enabled the issuer to direct-market to the crowd, who could then invest without opening brokerage accounts and the ability to send funds via wire, check, ACH or credit cards.
  3. The underwriter used FundAmerica technology to fulfill its compliance obligations of trade review, AML clearing & exceptions, monitoring status of funds for each investor, monitoring escrow activity and balances, accessing investor subscription agreements, and data retention.
  4. The escrow agent, Prime Trust, used FundAmerica technology to process all transactions, reconcile accounts, manage cash discrepancies, process refunds, and effect the closing of the offering.
  5. Then, at closing, first, the issuer, using FundAmerica technology, securely transmitted the data of all investors to the transfer agent, ComputerShare. Second, the underwriter conducted a DTC settlement with ComputerShare so that shares could be delivered to brokerage accounts.
  6. ComputerShare now offers direct investors a log-on to their system and a tool to process & transact a sell order on their shares. No brokerage account needed! No DWAC, no hassle, easy.

The Result?

  • Millions of dollars raised via traditional broker-dealer syndication.
  • Millions more raised directly from the crowd.
  • $19M+ total successful raise, happy brokers, happy investors, frictionless offering. Oh, and one very happy issuer.

Congratulations to Arcimoto and to everyone involved in this ground-breaking offering. Now that the structural and technological problems have been solved for Reg A IPOs, we can all look forward to many more!

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