Florida financial regulator looks to update crowdfunding rules
Former Coral Gables-based securities lawyer Russell Weigel, who took over the reins as Florida’s top financial regulator in March, is focused on streamlining the state’s Office of Financial Regulation by leveraging technology and encouraging legislation that will bring banking and crowdfunding codes up to date.
Roughly a week after Mr. Weigel took over the position, he said, the department was thrust into telework due to the pandemic and roughly 280 employees transitioned to working online. While offices are technically still open under Florida’s emergency mode, he said, many employees still choose to work remotely – a trend that may drive the department to cut back on office space.
“OFR’s function,” Mr. Weigel said, “is to regulate the financial services industry, which includes banks and credit unions, securities industry, and consumer finance.”
Realizing that many regulators can do their jobs remotely, Mr. Weigel continued, has given the department confidence in teleworking and allowed them to consider reallocating resources.
The goal, he said, is to “streamline and consolidate” internal functions and eliminate “redundencies,” leaving more funding for enforcement.
“We’re contemplating a substantial reduction in our physical office locations,” he said. Utilizing telework, he continued, the department could base investigators close to vulnerable communities without needing them to be anchored to a physical office.
The investigations team, he said, focuses on quality over quantity when it comes to reviewing cases – though the advent of the internet has brought with it a new class of financial victims.
While many scams target the elderly, Mr. Weigel said, the rising popularity of cryptocurrency and subsequent cryptocurrency-related scams has resulted in a younger demographic of victims.
As the government approaches the new year, Mr. Weigel said, the department will also look for sponsors in the state House to support legislative efforts intended to protect the public and advance job growth.
One initiative that could make Florida more competitive with its federal banking regulatory counterparts, he said, is implementing a public records temporary exemption for banking applications. Applicants, including the organizers, potential directors, and executive officers looking to start banks, he explained, may be employed by other banks and could prematurely lose their employment when new bank applications are made public before approval under Sunshine laws – an incentive against starting a bank at all.
Mr. Weigel is also hoping to promote efforts to improve crowdfunding legislation, as no company has done an in-state crowdfunding offering despite Florida having passed crowdfunding legislation in 2015 based on the nationwide Jobs Act of 2012.
“The state crowdfunding statute doesn’t work,” he said. Under Florida law, to offer in-state equity crowdfunding a company must contract with an internet portal or with a licensed securities broker – but no such portal has registered in Florida.
Companies seeking crowdfunding can instead use a national portal and be subject to federal regulations, but this does little for those looking for local investors. Five Florida-based (but not state-registered) portals are registered with the SEC and Financial Industry Regulatory Authority.
Unlike the well-known gofundme.com, he said, which allows for donation-based crowd fundraising, equity crowdfunding allows investors to reap returns on their investments, and Florida could benefit from having its own in-state platforms. Georgia’s crowdfunding law, one model Florida could follow, he said, doesn’t have a portal requirement and makes it easier for crowdfunders to raise capital.
“Florida has enough people in it,” Mr. Weigel said, “that we ought to be able to do our own (offerings) without incurring some of the restrictions that are posed by a nationwide offering.”
For example, he said, under the current conditions a local coffee shop would have to jump through the hoops posed by making a national offering to raise investments from its customers.
Mr. Weigel, Miami Today reported last year, worked 11 years as a federal Securities and Exchange Commission enforcement attorney according to his application and as a securities attorney in Coral Gables immediately prior to his appointment.
“I’m a government guy who’s been on both sides of the table,” he said.