the table are there certain principles that may be guiding guiding principles so that you can have a way of weighing what you're doing so that you come out withh and i'm not asking you for your final solution i'm just trying to figure out what are the kinds of things that you think that you think that you all would be looking at i'm mainly concerned about again those guiding kind of cross that's an excellent question congressman i think that the starting for example with the ban on general solicitation if we eliminate the ban so that offerings private offerings could be made to accredited investors through publicity through advertising and the like i would want to know whether we're confident that the group that's getting sold to is the group that doesn't need protection and that the people that are getting sold to are in fact accredited investors so those are things that i think will be important in the mix if they don't need the protections of the securities laws then it may make sense to make it easier to reach them if they are the group that needs the protections of the securities laws because either they're not really accredited and they're getting they have fraudulent brokers who are putting them into deals they shouldn't be in so i'm very concerned about that factor so i would like to and so in that area those are the those will be going into our the staff's recommendation on the five hundred holder limit i would like to know what the investor makeup is in these companies street name and you don't really have they have thousands of investors but they only count as two hundred because they're held through brokers or are these companies that are the engines of growth and they have four hundred and ninety nine holders and they can't raise another dime because they can't get one more holder companies who go dark because they are held through street name might need a different test than companies that are held by investors directly and are bumping up against the limit and are in desperate need of capital  with regard to those who need to be protected will you be looking at you said that you would you're concerned about them but then going back to some questions that mr hmchenry asked hyears and gao is doing a study of the definition in the meantime so i don't see that as a definition we're changing on the immediate horizon but it is a definition that does need to be a living breathing definition as investors change for example should there be a special accreditation for people who are chartered financial analysts who don't happen to have a lot of money for some reason things like that it might make sense to add people to the list mister cummings thank you very much  i thank the ranking member i have only one question for you as a quick followup the current statute envisions that all investors are in one pool so if a company has no program for their employees to own stock no any form of stock options they could have five hundred street name investors which could thousands of actual investors through their well if a company has one thousand employees they want to offer they have no choice but to in fact avail themselves of an alternative because the same five hundred applies regardless isn't that true it's correct that the same five hundred applies i think that for some companies that are traded in the overthecounter markets not on exchanges they are held in street name even though they're not reporting companies those companies could also have their employees hold in street name in theory those are not the kinds of companies we're really talking about at this hearing i think the companies you're talking about are the companies that are preipo companies who are growingh chairman issa correct ms cross dynamically and for those companies the thank you all for your patience i noticed i believe all of you in the audience so you know our questions now the question of course will be will your answers be similar to the first panel i knew i would get a laugh i worked hard on it we now recognize our second panel mister barry silbert is the ceo of secondmarket an alternative trading system and a young entrepreneur in his own right mr the cato institute and mr hjonathan macey is a law professor at yale university last but not least the honorable roel campos is the former commissioner of the securities exchange commission as you saw in the first panel our rules require all witnesses be sworn so please rise and take the  panel we will take hminutes on our side and i'll try not to cut anyone off midquestion orh and i won't cut any of you off midanswer however there's a lot more of you so on your opening statements please limit good afternoon chairman issa ranking member cummings and members of the committee my name is barry silbert and i'm the founder and ceo of secondmarket i'm grateful for the opportunity to testify this afternoon regarding the future of capital formation an important issue that directly impacts job growth and  global competitiveness i founded secondmarket in two thousand and four to create a transparent centralized and independent market for alternative investments including stock in private companies we've grown rapidly and now have one hundred and thirty five employees in new york and san francisco proprietary trading meaning we do not use our own balance sheet to purchase assets that are put up for sale in secondmarket up until a decade ago fastgrowing startups followed a very similar capital formation path they raised venture capital a few rounds of venture capital and went public in about hyears for several decades these small cap companies could thrive in the public markets with research coverage brokers and market makers driving investor interest in these companies the public market allowed companies like starbucks int dell to grow from small cap companies into jobcreating economic powerhouses however the capital formation process has evolved over the past decade and the public markets are no longer receptive to small companies it now takes companies twice as longh nearly hyearsh to grow to reach the public market a number of factors have contributed to the systemic problems that exist in the public market these include a shift from stockbrokers to online trading the inability for market makers to profit for  supporting smaller cap stocks the lack of research coverage on smaller companies and finally the implementation of sarbanesoxley which made it cost prohibitive to be a public small company you can read more about these issues in my written testimony one other important systemic change is the emergence of computerdriven high frequency trading although it brings liquidity to the public markets these traders ignore small cap companies and have contributed to the casinolike trading atmosphere in the markets the small cap market is a vital part of the capital formation process and the failure of the u s capital markets to support these companies inhibits our ability to create jobs innovate and grow consequently a new growth market must emerge to support these companies and i believe that secondmarket is that market chairman schapiro has said that the sec is reviewing the regulatory landscape to lessen the burden on private companies president obama has also ordered a review of government regulations that place an unnecessary burden on businesses i applaud the commitment of administration i believe there are two regulatory hurdles in particular that must be reexamined first is the socalled five hundred shareholder rule as discussed previously pay structure at startup companies generally involve giving employees below market salaries coupled with stock options these options enable employees to realize the financial upside while enabling the startup to hire top talent even though they don't have the cash to pay market salaries as a result this rule has created a disincentive for private companies to hire new employees or acquire other businesses for stock as the companies are fearful of taking on too many shareholders and thus triggering a public filing requirement the second rule that must be reexamined is the prohibition against general solicitations given that only accredited investors are eligible to purchase unregistered securities such as private company stock we should strive to maximize the pool of investors that are aware of any offering in short let everyone see but only let accredited investors invest the foregoing i would respectfully propose the following rule changes first a significant increase or elimination of the five hundred shareholder threshold second if a threshold is increased but not eliminated an exemption for accredited investors from that count the and finally an elimination on the prohibition of general solicitation provided that the ultimate purchaser is in fact an accredited investor i believe the problems facing growth stage companies must be addressed and failure to support a new growth market will significantly limit committee my name is eric koester and i'm one of the founders of zaarly a locationbased realtime communitypowered marketplace launchingh crossing your fingersh nationwide this month i greatly appreciate the time to come before you today i am what mr hsilbert earlier described a hopeful fast growing company and as a former startup lawyer turned entrepreneur myself i have had the unique opportunity to advise counsel and educate thousands of entrepreneurs and early stage businesses as well as live the life of business owner myself therefore i have seen some of the challenges affecting today's entrepreneurs and small businesses firsthand my testimony today is aimed to highlight specific concerns from the mouths of entrepreneurs that affect the ability of our young companies to markets and to regain the leadership position to support early stage businesses others on this panel may be better suited to provide information such as data research and analysis on broader market trends but my purpose as an entrepreneur here today is to share how some of these regulations can impact our ability to fund and grow these emerging small businesses today's economy is very different and entrepreneurs and small businesses have unique opportunities in speaking with entrepreneurs and myself i believe there's a few key lessons that we can learn from the proverbial entrepreneurial field first building a small business today is actually cheaper and easier than it's ever been before in our nation's history second and a big however building a business is not cheap and it still requires substantial resources and investments to make these businesses thrive number three raising funds in itself is difficult and it has become more difficult given the decreased liquidity of our banking system and identifying prospective investors is extremely distracting to the task of building and starting a new growth business and fourth the most important lesson learned from entrepreneurs today is that removing friction friction in business friction in commerce friction in human capital and important to this economy committee today regulatory friction is crucial to be able for these businesses to do more with less a brief story about my current business zaarly and why i think that removing friction is so important to the success of other businesses like ours my business was just an idea hweeks ago in the last hweeks we've been able to hire a team of nearly a dozen individuals nearly fifty contractors open two offices deploy robust technology solution raise funding and hopefully file several patents and trademarks to ready a marketing effort to take the nation by stormh we hopeh this month our goal is to be with some luck and support of customers the next amazon ebay or groupon the important lesson to learn about zaarly is that we've launched this market in a very short and rapid time leveraging the  trends in industry but what's also important to know is that other businesses may not have the advantages that a zaarly has by having a reformed corporate lawyer on their team to navigate some of the difficult legal issues so the story of zaarly and its rapid growth and hopeful success from here highlights some several lessons it highlights that the regulatory schemes are very complex for early stage businesses and are distracting to their success sufficient funding resources are crucial to their speed and there are dozens of ways for these businesses to trip up on the existing regulatory scheme so alternative funding schemes are important to find and to reduce the operational expense of taking a business from a startup to a successful business venture therefore i'd like to propose and encourage the commission and this entire committee to look at four important things continue to examine private company fundraising and financing regulations including things such as general solicitations and the ability of private investors to be deemed accredited when they are sophisticated investors second to explore more options like private market regulations like my colleague mr hsilbert's secondmarket which can increase liquidity for lower tier businesses in the chain such as myself third to explore the options for community funded or funding organizations where small dollar amounts contributed by the community can be used to fund businesses like mine and finally while not within the purview of this committee i think it's important that the immigration reform impacting startups such as the startup visa program h assume we had no sec how would you design it would you create one would it look anything like the sec we have today there has been a lot of evidence that the sec is somewhat dysfunctional we've been losing global market share we've had  choice school of economics that looks at the motivations of people within bureaucracies in the whole area of costbenefit analysis i think is an under managed activity within the sec we have a basic conflict the sec is an agency primarily driven by lawyers relatively few economists and as an economist i have a certain bias here but when i have been on a board of a regulatory agency and i have seen the problem that the regulators of course keep their jobs by coming up with more regulations and rules i'm not saying they are of evil intent but it's just the nature of the way people operate and the job of really the chief economist role is to say no to rules that aren't justified but they have to really be independent from the rest of the staff in order to do an objective job we to give more balance to really looking at the costs and benefits of every possible regulation every piece of paper everything that comes out one example is the whole area of accredited investor this started off with the perfectly good intent of trying to keep the allowing people who should be able to take care of themselves to be in without having to be regulated but we look at what has happened right now we only have about  percent of the u s population that qualifies as an accredited investor does this make any sense you can have a rock musician or a sports figure who meets the income and net worth standards but a young tax be able to be accredited investors we ought to have at least hpercent of the population or i think a lot more most people can make judgments people make mistakes we find even the richest and most sophisticated make mistakes we  trading it seems logical to oppose insider trading but there's a lot of now academic evidence scholars law and economic scholars who have studied it and say no this is actually causing us more problems we get into the whole area of what i call vague law with insider trading the sec brings many insider trading actions but they're unsuccessful in the vast majority of these and part is because we can't even define insider trading and so i argue that we really need to go back to square one here think of how we set up these organizations to truly protect investors and not get hung pleasure to be here and i enjoyed very much listening to the questions and the answers particularly the questions in the first panel which i felt were extremely well informed and i wanted to elaborate on some of the points that were offerings in the united states and i want to make it clear that both of these sets of statistics are interesting and important and accurate one set of statistics introduced by the chairman is the  idea that the number of u s public offerings over the last hyears has been in decline that statistic becomes more interesting i think it's an interesting statistic it becomes even more interesting in light of the article from the atlantic monthly that the ranking minority member mentioned that says that while the number of initial public offerings may be going down the amount of money raised in public offerings not just the number of deals but the actual amount of money has been going up what that means of course is that because both of these sets of statistics are accurate is that we've had few public offerings but each of the public offerings that we've had has been raising on average more money than investors have in the past what this means i think  that the capital formation process has come to be dominated by only the very largest issuers that is to say with respect to the statistics in the atlantic about the amount of money raised in public offerings one offering of five hundred dollars million counts exactly the same as one hundred offerings of hmillion and i think this raises an extremely important point about the disproportionate impact of the regulations that we have regulations have benefits and they have costs the benefits are generally the same for all investors and all firms the costs however fall disproportionately on small and medium size firms because they take the form of fixed costs so the relative burden on a very large company of going public hasn't gone up very much but the burden on small and medium sized companies has gone up quite a bit and really if you compare the industrial structure of the united states with respect to job formation with respect to diversity both in terms of product lines and in terms of technology and in terms of geography across the country the real strength of the u s economy has been that we have a very large number of small and medium sized firms and relative to european economies and asian economies our economy is much better the firms  economy are much better distributed between small medium and large firms rather than having as we see in other countries no middle sized firms or very few and firms disproportionately collected at the small and the large end of the continuum and i think that it would be very useful in thinking about the reform of these sec rules particularly the fifty shareholder ban and the general solicitation ban to think about the disproportionate impact of these rules on small increase the number of companies the number of entrepreneurs the number of businesses that have access to the capital markets so with that i will spend my last minute talking about a couple of specific things one the general solicitation ban and the  five hundred shareholder ban i don't think that either of these provisions help small or medium sized businesses i don't think either of these provisions protects investors i also want to point out as a factual matter that the sec's justification for the general solicitation ban has changed quite a bit over time now it is some idea that we need to protect investors it used to be the original justification for the general solicitation ban good afternoon i wish to thank chairman issa ranking member cummings and the other distinguished committee members for the invitation to testify today my name is roel campos i'm currently a partner with the national law firm of locke lord bissell and l committee is considering but instead i testify today from the perspective of a former sec commissioner like you and the sec currently during my tenure as an sec commissioner i often faced the difficult challenge of how best to reform and improve securities laws and regulations i learned firsthand how difficult it can be to balance the goals mandated by congress protecting investors but also facilitating capital formation and preserving the integrity of the markets with your permission my testimony today has two modest goals presenting a very short discussion of factors in consideration that must be balanced to produce sound regulations and offering observations and suggestions to assist the sec to achieve appropriate reform of current securities regulation first let me briefly  by discussing investor protection in my experience this concept when raised regularly produces cynicism and the disbelief that this is a serious goal in today's complex environment m submit that investor protection remains today as important as it was eighty years ago when congress made it the fundamental underpinning of the securities laws rpts thomasdcmn norman p m mister campos as a commissioner i was often asked with respect to investor protection well what investors exactly and do investors really need much protection certainly the term investor is very broad congress and the sec have never made a distinction among the categories of investors which include institutional investors e pension plans which can represent public and private employees and often include in professional investors private asset managers and hedge funds and finally there is the distinction of retail investors the everyday person who holds a brokerage account or who tries to manage his or her retirement plan during my tenure at the sec i was privileged to represent the agency in the international arena where i learned firsthand that our markets are unique securities markets in europe and asia are comprised almost exclusively of institutional and professional investors in the u s however retail investors provide a significant portion of the capital that is invested  retail investors therefore add a depth of liquidity and offer a diversification to the investor base to the u s markets that cannot be found elsewhere in the world indeed the liquidity and the diversity of the u s markets help convince many foreign investors to invest in the u s as a commissioner i worried most about retail investors as the others often have strong associations and lobbyists to present their views and their needs to the commission  the sec staff so the retail investors however are the ones who most quickly can leave the markets when the problems rise and as was discussed in the first panel when there is a crash when there is a problem those particular investors flee the fastest let me move to some ideas that i have regarding the situation that we have today the sec has stated in the panel very clearly there has always been and i submit continues today a deep annoyance that the sec takes too long to consider new ideas and recommendations for improvements this problem arises from i submit resources insufficient staff that have other skills that go beyond being lawyers so i would submit that that's an area of consideration for this particular committee and with that i see my time is up and i thank you for  thank you for this distinguished panel again in addition to those who came before us i am struck by the remarkable amount of willingness on this panel to be taking creative looks at where we ought to be going with the s hsilbert i had the opportunity to spend a little time paying some attention to your business model very impressive in terms of what struck me is the idea that you really have created a market for sophisticated investors people who take the time to understand that there's a lot of different kinds of securities out there that can become able to be liquid which both creates liquidity it also allows people to participate that may not reach this threshold for sophisticated investors can we expand the definition of sophisticated investor some way to include the kinds of people that put the sweat the main thing we want to know is have people actually paid attention all of us make all kinds of investments we buy houses and automobiles one can go to las vegas and gamble away your fortune you don't have any n i think the main thing rather than trying to say you have to have a certain net worth or a certain education if the sec gave a piece of paper to everybody who was going to invest or if we had one and it first pointed out the low probability of new ventures you know give whatever statistics we had on that warned people against it like we do lots of other types of warnings for everything from cigarette labels and everything else and exists rather than doing their own due diligence and obviously we really have to have a way to protect people who really can't do any kind of evaluation on their own but the vast majority of americans i have the brains and the skills to be able to do this and to rule out all but two percent of our citizens because what that does is discriminate against young people and others who want to get rich w e saying now only the people who are already rich can have the access to the best opportunities that seems to me totally unamerican mister meehan professor macey you were precluded from getting in the full scope of your testimony by  the hminutes but i enjoyed reading your testimony and i was a little bit at some points i was struck by your notion that tied into one of the questions i asked about china the markets have changed dramatically in the years since united states now we're turning into a global marketplace there's more than one cop on the beat where do we go tly give these folks very perverse incentives so for example we heard in the first panel this morning something that we always hear from the sec when they're being questioned they say we're doing a really good dollars to the u s treasury so we've set this up as the criteria by which we judge the sec that means that what they're going to do is go after the biggest fine they can that does not help the small or mediumsized investor the smaller mediumsized investor by definition loses the sec you really cannot make a career for yourself by making the securities regulations simpler no one wants to hire you to work at a big wall street firm to charge you a lot of money talking about striking a balance but do you think we're going too far campos i think that is the fundamental question in regulation and that's where and why you have such heated discussions at times because you're dealing with a broad concept investor  protection within the aftermath of the one thousand nine hundred and twenty nine crash when all of these laws were written and we have a very different world and a very different economy today so when we talk about investor protection i think you can achieve investor protection by finding a way to allow all categories of people not necessarily through a financial test to be able to participate in particular investments the real  protection that's necessary is the idea that investors of whatever category can get taken advantage of and can be lied to and can be cheated and be misrepresented or critical facts can be hidden so you can achieve this i believe it may be ironic to some people but i favored when i was at the sec products that allowed under the investment company act mutual funds that allowed small investors to have a taste of some of the more complex items if they were placed correctly in funds and regulated i felt why should only rich people have essentially the opportunity to have the more sophisticated ideas and investor protection goes toward the idea that you need a system that people are not expecting to be guaranteed making money or profits that's not what we have here you can pick a stock and it may not go up it may  down and retail investors leave the market what can the sec do to help boost investor confidence in the united states capital market mister campos great question and people will disagree on that one as well but essentially what we so from the getgo i think that the markets need you know careful study in that particular area what does fast trading what does fast trading in nanoseconds what has that done to the average person who whatever something is going on in these markets that needs study that needs help in my view mister cummings somebody asked a question they said that the system is so much things are so much different than back long comments and then it's essentially a who pushes the hardest in terms of the players a very difficult situation imagine a judge in a courthouse having to take opinions from forty different sections and reading all the research themselves it is a very difficult situation in terms of figuring out what's best for the markets in particular when you don't have the base of expertise so i do believe that one great improvement would be that the agency get resources to have those types of people a dramatic way to the u s economy the business that we've started zaarly is a business that we hope will have a dramatic impact on markets persontoperson commerce and hopefully have an impact on employment but that's only accessible to us because of the fact that we had forward thinking investors to put capital in early and efficiently that allowed us to run very quickly to the point where we took a business from an idea to hweeks later to launching a very largescale business mister mchenry now in terms of getting employees to come in for a startup is it important for them to have some method of sort of longterm payoff mister koester absolutely absolutely i think equity is an important thing for people willing to take that kind of risk but i think that's the thing that is attractive about startup companies and earlystage subject themselves to a lot of the negatives of being a public company whether it's the sarbanesoxley or disclosure that type of thing so what we have seen over the past couple of years there are a growing number of companies that have come to appreciate that if you can allow your employees at a certain point in time the return and obviously if they can't get that return over time they're slow to reinvest that money again into businesses so the fact that they can gain liquidity earlier in the process from ten years down to five years potentially allows them to have two cracks at the apple and potentially invest multiple times s in order to get capital injected into your company right and to free up maybe some of the capital you've got invested in but long term it's really about accessing capital for that company so they can grow jobs and actually grow larger that's the reason why you have shareholders who want to participate mr hmacey we discussed the five hundred shareholder caps your views on it and sort of where you'd like to see this thing go certainly i just want to make two points about it first i am against the five hundred share cap i think that particularly with respect to employees it provides a real curb on the ability of companies to provide incentives different than cash compensation the point i want to make though that hasn't been made yet is simply to observe that there is a very close correlation between the five hundred shareholder rule and a whole bunch of other rules so for example we heard this morning something the sec is very proud of and i am not opposed to it is there's a reform of a couple of years ago to say that employee stock options are exempt from this five hundred count so you can give all the options you want without coming under the five hundred count norm but what i don't think the sec fully grasps as it relates to the five hundred shareholder rule is it doesn't do me very much good to have an option to buy a share stock if that share  number to some sensible level we need to go beyond that to really help the u s economy create jobs because we need to we need to make that stock grant just like the oxley grant worth something to the employees and it becomes worth something really highlighted two pieces of the puzzle and it is a very large puzzle having been an investment banker i think that the structure in the investment banking industry is also very important to this there been a few glancing blows dealt to that topic but the fact that analysts find it difficult to make a living following stocks especially smaller stocks is a fundamental problem that also implies that the retail investor needs the help of an analyst and ideally the help of an honest analyst that won't just lose the stocks that that company happens to be underwriting at the time there are many issues in the structure of the investment banking field one of them is the fact that proprietary trading has become so lucrative that it makes pretty much all feebased services pale in comparison and then that sets up a conflict of interest issue if they're in fact betting against issue of their own client so that's a whole segment of the problem another problem is many retail investors have the idea that all ipos are automatically good well many of them are disastrous many of them are a search for the dumbest dollars they can find in america overly valuing a company and leaving the poor retail investor holding the bag perhaps has been seduced by an overly optimistic analyst report so the search for the informed investor is truly a difficult task we saw this in one of the least h d features of our recent session money market funds most everybody has a brokerage account and who knew who knew whether the investors were accredited or not the risk of breaking a buck on those funds and i think the government had to step in with perhaps the chairman can remind me wasn't it a three dollars trillion seatofyour pants guarantee which may have one of the most fundamental features of the bailout basically everybody in america was bailed out and no one wants to talk about that there are other features to that puzzle but that  should strike the heart of every investor out there even i imagine some university endowment funds didn't really know so it seems to me that one of the core issues here since really money according to most investment bankers really isn't the issue it is a question of company valuation and who wants to acknowledge that and the phrase in the business is you don't bet on the horse you bet on the jockey and the real shortage is not money it's management talent and experience but these are some of the unacknowledged puzzle pieces that are out there  so i commend the chairman for holding this hearing i know that he's founded a very successful company in his own right but getting this right for the whole country is really going to be a challenge because financial literacy probably has not increased over the years and i not sure that television advertising helps us a whole lot in understanding this so i shudder at the thought of some of these general solicitations that could be amazingly appealing but really just be hiding an investment that's not into this hearing with predetermination certainly chairwoman shapiro was very quick to say she knows some of these reforms have to happen and it is mostly her mandate and i think it's one of the reasons we want to have the encouragement this would be for the whole panel if you care to comment on the efficacy or constitutionality of the general solicitation ban i'd like to hear your perspective well it's easy for me to do because i am not a lawyer but i can read the english mister gowdy sounds like you're bragging mister rahn yes yes i can read the english language however and the first amendment to me is very clear and it seems to me there is a facts around this issue on either side one is i think congressman issa made this point that it's absolutely nonsensical that a pharmaceutical company has the right to advertise on television a prescription medication and a company can't make a similar solicitation for securities when you get off the airplane in europe you see that all the time the problem that lawyers have i think on the other hand with the issue that you raise about the general solicitation is that if we start putting sec rules congressman under scrutiny from a first amendment constitutional lens we open up a real fines because that's the way we judge success and i tend to judge enforcement more by active prison sentences than i do the size of the fine so accepting that the sec is not the united states attorneys office are you satisfied with the level of criminal prosecutions or fraud and if not what can be done about it  that if one looks at for example financial fraud particularly insider trading prosecutions i think that the problem that the government tends to have is is just as a general rule done three things that involve really criminal fraud i've never understood why the government would charge them with a hundred count indictment where when you get to the number ninety seven ninety eight ninety nine one hundred these are pretty big more helpful if they said where you've actually really committed fraud here in these situations where we know we have because the structure of a criminal trial is once the criminal defense attorneys cast doubt on a few of these items then  the government can't come in and say oh well we weren't really serious about charging those here's what we really want the guy to go to jail for so i think we need to be more selective and go after real fraud another thing is who are we really protecting somebody mentioned in the first panel gee isn't this great that we fined goldman sachs so much money with respect to this cdo scandal and the way it was selling structured products to investors i always like to remind my students  that the people who were ripped off in that case were two financial institutions one of them was ikb deutch industria bank a dusseldorf germany headquarterd bank and the other was abnm amro a giant financial institution in the robbery and when you rob a rich company we call it something else and if for no other reason other than to just prop up what's left of public trust in our criminal justice system i would just like to see more  suits prosecuted and fewer folks who don't have the means to defend themselves mister macey i agree my point is simply i'd like to see more suits brought where the person who is being ripped off is not abnm amro there are plenty of small investors who are being ripped off as well and i public offering the first thing you have to do is go to what used to be kind of the big ten the big eight the big six and now the big four which is becoming interesting since one of them has to give you a credit or sorry a debt evaluation another one can do something else pretty soon you run out of them able to do anything for you so whether you use pricewaterhouse coopers or a regional audit firm the audit standard for gap is essentially the same is issa so the standard for an accounting firm standing behind a qualified opinion is going to be the same for these companies whether they're public or private isn't that right   it's fine on my facebook right i just can't drive people to my facebook so when we talk about the first amendment and it sounds very lofty and when you go to the constitution you sometimes lose the cspan audience because they say oh well that's not a recent document the recent document of posting something on facebook being okay while not being able to go to investors of record who do this kind of investing repeatedly and sending them information soliciting them currently is not available let us go one step further all the major firms have and i am getting yeses let the record indicate those are all yeses she's very good but she doesn't hear pantomime let's understand that right now the current status quo allows large brokerage firms to make these markets and mr hsilbert you're larger than you once were but you're not a conventional brokerage firm you don't have a whole bunch of and correct me if i'm wrong you don't have a whole bunch of people paid bank of america merrill lynch too they can in fact make these markets have hundreds of investors behind a single name and it's okay it's just not okay for me to post to my facebook and drive people to go look at it and consider investing even if they're qualified is that the status quo we're dealing with mister koester and as a former startup lawyer it is one of those rules that's oftentimes mystical to the individual who's doing it but there's a lot of different ways that people wind up kind of finding magical ways to solicit without soliciting chairman issa now the chairman when she was here was unable to answer hypothetical questions for good reasons she's doing a due diligence and i commend her for starting this process but you all are here to answer the hypothetical so  oversee in other words an sec list of qualified investors and they lift the cap on that list of investors those who either with the help of a jp morgan or goldman or somebody or on their own fill out a as i close we have two major items here the employee who has a benefit limited unless we take the cap off for them and the qualified investor who either is limited because there is only four hundred and ninety nine option or is unlimited because they are a conduit through if we allow for that direct and the solicitation of those registered investors that's good with everyone on this panel is that right