William Carleton, Counselor @ Law

The accredited investor definition, after the Supreme Court strikes down DOMA

We're going to adjust tactics in the startupequality.org campaign, working off the premise that the Supreme Court will strike down DOMA sometime this month.

None of us are professional Court prognosticators, but, surveying the predictions of some of those who are, we are presuming that the Court will hold that the federal statute cannot override the policies of the various states as to who may and may not marry.

This means, we think, that "spouse" for purposes of federal laws and regulations will have to mean any person's spouse in any marriage, regardless of that person's gender. (Right now, because of DOMA, "spouse" under federal law has an attenuated and openly discriminatory definition, expressly requiring that a "spouse" be of an opposite gender.)

With respect to high net worth individuals in same sex marriages, the overturning of DOMA in such a manner probably solves the problem: "spouse" under SEC Rule 501 of Regulation D will simply have a natural and intuitive meaning. If you're married, you're married.

Less clear are those situations where the legal relationships between same sex partners are something other than marriage. These legal relationships include, but probably are not limited to, domestic partners, designated beneficiaries, and parties to a civil union.

We think that, immediately following the overturning of DOMA, the SEC should issue an interpretive release or guidance, to the effect that, for all purposes of the accredited investor definition, "spouse" will include not just spouses in marital relationships, regardless of gender, but also domestic partners, designated beneficiaries, parties to a civil union, and all other persons to whom any applicable law (federal, state or local) extends economic benefits.

Photo: HystericalMark / Flickr.

Non-accredited investment crowdfunding in North Carolina this summer?

Go to Crowdsourcing.org to get an update from Mark Easly and Steve Reaser on the progress being made in North Carolina toward accomplishing a state investment crowdfunding exemption for non-accredited investors. From what they report, it sounds like North Carolina might put such a law in place this month.

You know how I feel about the North Carolina bill. It puts the "crowd" back into investment crowdfunding (when the Senate gutted Congressperson Patrick McHenry's successful bipartisan bill in the process of putting together the JOBS Act, a chance for a meaningful experiment with investment crowdfunding at the federal level was lost).

Let's hope that in the process of committee markups and conference committees and the like, the North Carolina bill stays simple and true to the core experiment, which is to explore the question, might everyone, whether or not accredited, be permitted to participate in backing startups and small businesses?

Because most startups fail and because even the most sophisticated angel investors lose most of their money on most deals, there should be paternalism in the bill, and there is: investors who are not accredited can invest no more than $2,000 per issuer.

I'm glad North Carolina doesn't get into sliding scales or other tests or information gathering requirements that would not only overly complicate the essential investor protection of a cap, but would actually expose investors to risks of breaches of privacy.

I also like how Mark and Steve talk about how the exemption needs to be as relatively easy and frictionless as a Reg D offering that's limited to accredited investors. Throw in the paternalism of a cap, to mitigate an individual's loss, and the comparison to a Reg D deal is exactly the right analogy by which to measure the honesty of the experiment.

Photo: Kim Seng / Flickr.

Shoved allegiance

For Father's Day, a verse I do not understand, I think by Wilfred Owen, used in the libretto of Benjamin Britten's War Requiem:

Tenor
"The scribes on all the people shove
and bawl allegiance to the state,
Chorus
"Agnus Dei, qui tollis peccata mundi...
Tenor
"But they who love the greater love
Lay down their life; they do not hate."

Who are these state scribes who shove and bawl?

The picture is from Benaroya Hall in Seattle, before a performance of the work last night.

Employees pulling to refresh patent policy?

One of the assertions (arguments?) in Jaron Lanier's new book is that the disruption of the buggy whip industry was not as catastrophic for the economy as it might have been, because a labor movement stepped in and demanded improvements in working conditions and wages as the auto industry took shape.

(Examples like this throw into relief his critique of the digital economy: labor and experience have been devalued, Lanier says, and literally taken out of all accounting.)

Well, I don't want to overstate the value of the Twitter's Innovators Patent Agreement, but it looks like it could gain traction, drive toward becoming an industry standard, if individual engineers bargain for the benefit of its use as a term and condition of employment.

The idea is that, as part of the bargain for an employer taking ownership of a patent on an invention, the employer concedes that the inventing employee has the power to decide whether the patent may be used to sue other companies.

Inventor Loren Brichter, whose pull-to-refresh feature was awarded a patent and is covered by the Twitter agreement, is quoted in The Verge as saying, "I really hope this becomes the de facto standard for hiring — engineers could demand this in their contracts."

For an overview and critique of the Twitter Innovators Patent Agreement that ran on this blog last year, click here.

Happy Friday Miscellany

It's been a long-ish week. Time to have a warm, flat, lightly hopped bitter to prepare for the weekend.

After the USA v Panama soccer match Tuesday, I thought about writing a post about patriotism. There is something about this NSA debacle that makes me feel patriotic. Huge differences among the citizenry of course, but that feels appropriate rather than dysfunctional, on this issue.

More and more smart business people are turning to accredited crowdfunding, and the laws and regulations seem to be in place to support such efforts. If this becomes a permanent feature or even defining aspect of angel investing, as I think it will, it will be more important than ever that the accredited investor definition not discriminate against prospective angels on the basis of sexual orientation.

DOMA will go down, right? But then the federal accredited investor standard will apply equally only to those same-sex couples in jurisdictions which permit marriage. The standard will still need to be changed, to be fair to those in states that are regressive.

At the soccer game, they handed out scarves that referenced the Star-Spangled Banner. "Oh say does that Star-Spangled Banner yet wave o're the land of the free and the home of the brave?" It is a question without answer, a rhetorical prod to remind us that the rules keep changing, and yet the changes are not keeping up with our ideals.

Buster Simpson's laundry

To prep for the retrospective of Buster Simpson's work opening this weekend at the Frye Art Museum, I looked up the artist's name on Wikipedia.

Turns out he's referenced in entries for other artists, but does not have a Wikipedia entry of his own!

This in spite of a body of work in public, metropolitan spaces (New York, Boston, Seattle, probably others) over decades.

The search result has me thinking: how does one live in an open, thoroughly engaged manner that nevertheless resists digitization? In philosophical terms, what behaviors will not be assimilated into the Singularity? In terms of the news of the day, what is it about certain kinds of information in plain sight that causes the surveillance state to not know how to see?

One answer may be to not consume anything.

Resisting commercial supply chains certainly seems to be the operative guideline for how the Simpson show was installed at the Frye. At a preview of the show, Curator Scott Lawrimore explained that no new materials were used in the installation. Instead of cutting new vinyl for signs to identify and explain pieces, curators wrote on the walls. To support a sculpture needing a base, geometric sections of drywall were sawed out and folded to make a table. In order to provide seating to permit viewers to relax while watching looped videos, Simpson fashioned stools using screens from discarded televisions.

I plan on being at the Frye Saturday, June 15, at 2 pm, when Simpson and Lawrimore are scheduled to lead a public tour of the show. Meantime, you can go visit a Buster Simpson installation of clean laundry in Post Alley, off Virginia Street, just north of Pike Place Market, or the southern edge of the Belltown neighborhood in Seattle.

At a preview of the show at the Frye, Curator Lawrimore joked that Simpson had spent as much time writing letters and seeking permits for the outdoor laundry installation as he did prepping the interior of the museum. "In the old days," Simpson rejoined, "we just put things up." (That may not be an exact quote.)

Hats off to Linda Thomas whose early morning tweet confirmed that the Simpson laundry was flying. I went down and snapped photos.

Spying vs. stealing

Imagine Facebook had to pay you for using any information about you.

Instead of balancing "personal privacy" against some super-secret corporate imperative to profile you for the purposes of manipulating you, instead of that, your individual interests, and Facebook corporate interests, were perfectly aligned.

You and Facebook were partners in the monetization of your information, your personality.

In short, your information was your intellectual property.

In the privacy paradigm, Facebook may or may not get the "balance" - between your interests and its commercial imperatives - exactly right, but Facebook alone controls all exclusive intellectual property rights.

In the personal-information-as-intellectual-property paradigm, Facebook must account to you for how your information is processed and exploited. No "balancing act" required; simple commercial reporting obligations ensure accountability.

If we thought about our information this way, and if our commercial relationships with large web services were built to meet such expectations, it would be harder for companies like Facebook, Google, Apple, etc., to cooperate with government requests for all the data that runs through the corporate servers.

"That data does not belong to us," they could say. Depending on their contract with customers, they might also say, "It is, however, available for a premium fee."

Some people might be willing to sell their information to the government in exchange for good and valuable consideration - say, a federal income tax credit. For some, maybe patriotism would be sufficient consideration.