Our state and federal regulators are on our side, and once you learn how to think like them it all gets a lot easier to make progress. That’s why we interviewed Richard “Rick” Blackwell, the Policy and Actuarial Manager at the Oregon Division of Financial Regulation. Rick joins us for this Q&A with the disclaimer that the event is not endorsed by the Oregon Division of Financial Regulation. Rick was easy to talk to and I would urge readers to look to the Division for guidance – he means it when he says “any of my team are happy to help.”
Standing for Businesses and Consumers
Ben: Tell me a bit about your team and how you work.
Rick: Well, I have two teams. In the first team, we examine the people that give investment advice and the people that sell securities like stocks and other investments. The second team is composed of public policy-type folks who write rules, work with legislators, and answer questions from executives and general public.
Ben: Can you tell me something interesting or unusual about your own career?
Rick: I started my career at the state working on constructions standards and only later came to the Division of Financial Regulation. I had to learn over time and am learning to this day.
Ben: So what are you learning about now?
Rick: I’m learning more about how the community public offering (CPO) exemption that passed in 2014 is affecting business. The new rules opened up options for really small businesses in a challenged lending environment.
Ben: How do you define local investing?
Rick: For our purposes, we focus on what kinds of securities can be sold to Oregonians under the law. In practice, businesses spend a lot of efforts getting investments from in their immediate area, so that is local.
Ben: Why is Oregon’s crowdfunding law significant?
Rick: Oregon views the development of the CPO rules as the first stage in a larger picture. Whatever you want to call the rules, we are headed towards the development of new ways for small business to grow. The rules are unique because they provide a good tradeoff between the amount raised and ease of raising the money.
The vision is to make it easier for small businesses to grow.
Ben: What is the vision for helping small business?
Rick: The vision is to make it easier for small businesses to grow. It is clear that, right now, the SEC sees the potential of the CPO exemption, but also the challenges faced by businesses. For instance, states with cross-border economies face challenges around advertising. A Portland business might think regionally and even do business across the river in Washington State. But regulators need to maintain an important distinction across state lines for any sort of crowdfunding to remain viable. Advertising is fairly expensive when done through traditional channels, so it’s a challenge if businesses have to advertise separately in different states. Advertising on the web is an option for CPOs but is challenging because of the expense of geolocation filters. Regulators don’t think that it’s necessarily fair for these challenges to continue.
Ben: So is the Division of Financial Regulation like an industry watchdog or a consumer advocate? Who is your target audience?
Rick: The goal of the Division is to ensure a positive business climate and to protect consumers and investors. Investors need to have enough information to go into an investment with clear eyes. The unofficial motto could be “meeting the twin pillars” of consumers and businesses.
Ben: What prompted policy makers to support the new rules?
Rick: We understand that most of Oregon is powered by small business – know that most businesses, small businesses, may be turned down for loans. Plenty of public studies and interviews have come up with that information. Also watching the non-equity, Kickstarter and Indigogo-type platforms, it was clear that there was at least some potential there, so then the Division went through the process of public comment and passed the new regulations.
Ben: Who benefits? Are there any clear success stories?
Rick: From the filings that the Division has seen, it really appears that the rule is meeting the intent – that very small businesses and small startups are able to put together a business plan and raise a certain amount of funds to get their ideas off the ground. For example, there have been two notable successes out of 20 filings. Those that succeeded were the epitome of main street business. When those community public offering campaigns are possible, you see those mom and pop businesses benefitting. The two businesses that were successful raised around $215,000, and for small business, that’s a good start and has a multiplier effect. One success is the Red Wagon Creamery – everyone knows they met their offering.
Ben: Can you give us a picture of your day-to-day work with the regulatory agency?
Rick: We aim to show a human face – the Division pledged for this to be a ‘light touch’ process. Essentially, the Division treats this [CPO] like a notice filing. The regulators come in, note that the filing has been done, and then they don’t spend an inordinate amount of time as you would reviewing a full registration of a security. We want people to be able to easily take advantage of the rules and this allows the department to focus on the filings that are more complex.
Ben: Has this become mainstream yet?
Rick: I think the idea of crowdfunding is becoming more accepted. For instance, my watch is from an Indigogo project. As far as equity, I think that it has been a fairly reasonable success. Oregon has had quite a bit more filings than other states that have intrastate offerings exemptions. It will take time for businesses to know this is a go-to tool for setup.
Ben: What resources are available to business owners and what should people know that would streamline the offering process?
Rick: Well, the rules require that you see a business technical service provider. A good first step is to meet with the business technical service provider. We don’t provide advice and recommend you consult an attorney, but any of the team would be happy to help answer general questions.
Ben: Can you tell us something new that our readers may not already know?
Rick: Any news? Well… the rules seem to be operating as intended. We are currently waiting to see how the SEC filing under the JOBS act will affect the state rules and are also waiting to see how the SEC will regulate advertising.
Richard Blackwell will be at our annual conference (ComCap16, that is) on April 26th, along with our other esteemed speakers. These are the people making change across the country, from buy local advocacy, community development, policymaking, law-driving, entrepreneurship, slow money movements and more (and more). A few tickets still remain.