Ethereum Merge - Securities

A friend shared this article today - discussions about regulating crypto as securities again.

This reminded me of a line of thought I was pursuing back in 2018 about faith-based finance and SEC loop holes that link to industrial banking and impact finance in Utah.

Sharing here in case you all have insights.

This tweet yesterday is odd - he’s with the Intercept / Omidyar. Why is a blockchain guy with a global / Islamic focus tweeting about LDS leadership in the US moving forward? Well, we know, but most people don’t.

Also @ldaven shared the video of a Texas virtual learning committee hearing. The new co-chair is LDS and she and her husband are influential lawyers with ties to Alito and big into religious freedom and school choice. The first person to testify for wrap around services is a long-time Utah state senator whose wheel-house is ed-tech.

This is my old research - from a dated email back in 2018.

"Wow. Small world. Did I tell you I was looking for someone who might be able to help me figure out what Clinton did with this philanthropy SEC loophole?

It would be related to faith communities or non profits “issuing debt.” Like these “impact securities” which is the next iteration of “pay for success.”

  1. SEC Regulation on Faith Based Debt

Stetson Paper on SEC Regulations and Non Profit Debt Issuance: Stetson Law Review

On December 8, 1995, President Clinton signed into law the Philanthropy Protection Act of 1995 (the Philanthropy Protection Act).13 The stated purpose of the Philanthropy Protection Act was “to protect and facilitate donations to entities organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes by limiting the applicability of Federal and State securities laws to the activities of such organizations in connection with the maintenance of certain pooled funds.”14 The Philanthropy Protection Act was intended to codify the position of the Securities and Exchange Commission,15 as set forth in various interpretive releases and no-action letters previously issued to non-profit organizations.16 The Philanthropy Protection Act accomplished this purpose by providing nonprofit organizations with additional exclusions and exemptions from registration under the various federal securities laws and by preempting certain state securities laws registration and reporting requirements.17 The National Securities Markets Improvement Act of 199618 (the Improvement Act) is comprised of five titles: the Capital Markets Efficiency Act; the Investment Company Act Amendments; the Investment Advisers Supervision Coordinating Act; Securities and Exchange Commission Authorization; and Reducing the Cost of Saving and Investment. The Improvement Act amended the federal securities laws to provide additional federal exclusions and exemptions from registration, and to preempt certain state securities laws requirements. Although the Improvement Act significantly reformed the state and federal securities regulatory structure, it likely will have only a limited impact on nonprofit organizations due to the various exemptions and exclusions available to nonprofit organizations under federal and state securities laws,19 especially after passage of the Philanthropy Protection Act. The Securities and Exchange Commission (the SEC) administers the federal securities laws and has authority to enforce compliance and to issue regulations under the federal securities laws.

  1. Delaware B Corps Law

The lax structure of the DE Benefit Corporation Law. Brigham Young Paper On Charter Schools:

Part IV introduces the benefit corporation. This Part will argue that by rebranding themselves as benefit corporations, EMOs can continue to profit from the public education sector while not making choices that mismanage charter school funding. First, this Part will explain the key characteristics of the benefit corporation entity by comparing the model approach to benefit corporations against the Delaware approach.

181 MODEL BENEFIT CORP. LEG. § 102. But see DEL. CODE ANN. tit. 8, § 362 (2014) (Delaware’s “Public Benefit Corporation” differs significantly from the Model Legislation promulgated by B Labs in that Delaware requires corporations to identify in its certificate of incorporation a specific public benefit that it will promote. But Delaware does not require its public benefit corporations to use a third-party standard when creating reports.).

Two states in particular, Delaware and Colorado, have adopted statutes with significant changes to the Model Legislation that set them apart from the majority of states that have adopted statutes closely aligned with the Model Legislation.188 Despite the changes, Delaware and Colorado seek to institute the same principles underlying the Model Legislation.189 Because many businesses select Delaware as their state of incorporation, this Subpart will first compare the key differences between the Model Legislation and Delaware’s benefit corporation legislation and suggest which approach EMOs should choose. 190 And then this Subpart will explore why EMOs should become benefit corporations. B. Comparing the Model Benefit Corporation Legislation with Delaware’s “Public Benefit Corporation” Statute as a Means of Deciding Which Statute Would Benefit EMOs the Most B Labs are the foremost advocates of benefit corporations and they created the Model Legislation to assist states in creating their own benefit corporation statutes. Delaware has enacted its own version of the Model Legislation.191 The two approaches differ in relation to the flexibility they allow corporations, with the Delaware approach being more flexible than the Model Legislation. This Subpart will now provide overviews of the main provisions in each statute, suggest which approach EMOs should adopt, and why EMOs should consider becoming benefit corporations.

  1. Industrial Banking Laws / Utah / Goldman Sachs Relocation / Silicon Slopes / Salt Lake City Impact Investing

An industrial bank is a state chartered depository institution that is:

  • eligible for FDIC insurance
  • exempted from the technical definition of a “bank” for the purposes of the Bank Holding Company Act of 1956 (BHCA),
  • otherwise generally subject to the same banking laws and regulations as other bank charter types.

The exemption from the BHCA means corporate owners of an industrial bank do not necessarily have to be bank holding companies. This enables non-financial companies to own and operate an industrial bank.

Historically, this class of institution has been available in Utah and only a handful of other states. Most of the chartering activity in recent years has taken place in Utah. Industrial banks were also known as industrial loan corporations (ILCs) in Utah until 2004 when state law was amended to rename this class of institution to better reflect their legal status as fully fledged FDIC insured depository institutions. Outside of Utah, industrial banks are often still referred to as ILCs.

In Utah, Industrial Banks Fight Added Regulation - The New York Times Utah is the nation’s unlikely capital of industrial banks — niche institutions that primarily make loans to businesses. Corporations like Goldman Sachs, Target and General Electric have been attracted to the state to set up such institutions. While they have brought billions of dollars in deposits, thousands of jobs and millions in charitable donations to Salt Lake City, the banks have also drawn fire from Washington.

Goldman Sachs in Salt Lake City:

  1. Powder Mountain Welcome to Powder Mountain – a utopian club for the millennial elite | Silicon Valley | The Guardian

  2. Evernym Evernym | The Self-Sovereign Identity Company

  3. Sorenson Family: Son is satisfied living in Sorenson shadow - Deseret News

I believe these are all connected, but I need help better understanding how industrial banking law ties into the SEC regulations around non profit debt and DE laws for benefit corporations. If you happen to know anyone with a legal mind, please feel free to forward."