Area-Wide Stock Markets to Finance Small Business

There is a remedy for the unavailability of capital for small business and the NYS Attorney General is the key. He/she has the duty under New York law to review and approve (or reject) applications by small businesses to offer securities to prospective investors, and to approve a local, area-wide or all-state stock market for the listing and sale of such securities. For many years, I have been a securities lawyer as well as a small business person and truly understand the problems and their solution.

Excessive Costs

The main problems that have prevented small businesses from raising capital throughout the United States is the excessive cost and effort needed to comply with the federal securities laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and the various regulations promulgated by the Securities and Exchange Commission (the "SEC") thereunder. These laws have been vigorously enforced against small business while at the same time the statutes and rules have not been enforced against the largest banks, securities firms, hedge funds and others, causing the latter to become excessively large (or too big to fail) and causing the former (small business) to be unable to compete and often to fail.

Ensuring the Securities Are Sold and Resold Only to NYS Residents

The federal securities laws and regulations do not apply to the raising of capital by New York residents if they limit their offering to New York residents, and prohibit the purchasers from reselling the securities to non-residents of New York.

With very little effort, the NYS Attorney General could create the framework for small businesses in New York (assuming they are owned by NY residents) to offer securities such as stocks or promissory notes to investors in the town, area or perhaps anywhere in NYS (with the resale restriction, to NYS residents only). Also, the NYS Attorney General could create the framework for one or more local, area-wide or statewide stock exchanges for offering and for resale of these NYS-residents only securities.

Small business creates most new jobs in the U.S. in spite of the handicap of not being able to raise money. The NYS Attorney General can and should correct this, and this would be one of the first things I would do if elected. It is an economic crime against Americans for American investors to have to invest in securities issued by foreign businesses (where the securities laws are lax or perhaps non-existent), because they are not given the opportunity to invest in local businesses where they live.

By making capital available for small businesses in NYS, we can expect a substantial return to investors, additional profits to the small businesses, and millions of new jobs (real employment, with salaries, benefits and payroll deductions) for New York residents.

Why hasn't this been done? For many reasons, but I can imagine a few: (i) small business is not organized to make campaign contributions to the elected officials who would be able to make it happen; (ii) your elected officials are too busy trying to curry favor with large businesses, especially since the amount of contributions they can obtain per contact is maximized when dealing with major corporations (and more so now that the U.S. Supreme Court is permitting corporations to finance elections in the U.S.); (iii) your elected officials never owned and ran a small business and still believe that a tax credit for a small businessperson will induce the small businessperson to create new jobs (when in fact for most small businesses a tax credit is worthless because it provides no immediate money and for small businesses without profits there would be no benefit at tax return time).

If anyone is seriously interested in creating jobs in NYS, and related business opportunities, and opportunities for NYS investors, the first thing they should do is make capital available for NYS's small businesses on a competitive basis, by facilitating the offering, sale and resale of securities in NYS's small businesses.

I can and will do this if elected as NYS Attorney General. It is more difficult to do for anyone else.

Carl E. Person
Candidate for NYS Attorney General - 2010