Exempt Market Update sat down with Sheldon
Stier, Founder & CEO of Exempt Logic to ask
some questions about his new software program;
a cloud-based software application that streamlines
compliance, sales, and administrative functions for
exempt market dealers and issuers.
We created Exempt Logic to standardize a platform for
dealers and issuers so they can transact their business in a
more compliant environment. Dealers and issuers have different
obligations, and we are focused on both NI 45-106 requirements
and NI 31-103 requirements.
Our software creates an environment where transactions can
be recorded by both groups and those transactions can in turn
be tracked and audited. Additionally, the software does not allow
certain transactions to occur unless the appropriate jurisdiction,
exemption, or financial qualifications are satisfied.
Other areas in the securities industry already have software
that functions in this way - FundSERV for the investment fund
industry, CDS for securities dealers, and so on. Both categories
have benefitted from having this type of standardized platform.
They’ve made them more efficient, while meeting regulatory
standards, and it has allowed them to grow and expand.
In order for the exempt market to have a chance to grow
in the same way, we needed the same kind of platform.
It did not exist. And so we created it.
Both dealers and issuers are beholden to regulators, for
different reasons. As they satisfy their own requirements and
populate their own databases, they are actually helping to satisfy
each other’s needs with that information; if you can connect the
two groups together.
Dealers populate their database to meet client statement
requirements. If an issuer could see that information, they would
automatically have up-to-date information for shareholder
A fundamental responsibility for dealers is to maintain
accurate books and records. Additionally, a new topic being
looked at by regulators is information redundancy or information
security in the case of a disaster affecting the dealer. Our software
provides “version” record keeping which allows any subscriber to
see what their database looked like on a certain date, and who
subsequently changed the information and that the date of the
change. It really is the ultimate in record keeping.
And since the information is in the cloud, should a loss affect
the dealers place of business, the dealer can simply relocate his
or her staff and continue his or her business with his records and
From the other side, issuers have to file trade reports to
regulators, known as 45-106F1s or 45-106F6s in the case of
British Columbia. These reports of trade advise regulators on
which dealers were paid commissions and who the exempt
market product was sold too.
Right now, both sides are doing the work. If we allow them to
see the relevant information from each other’s businesses, we’re
not only solving bottlenecks for them, we’re actually helping them
to eliminate entire steps in the process while giving them more
information than they had before.
Dealers will need to know about how many units are
remaining in a particular issuers offering, has an offering closed,
or has a distribution been paid to investors. Conversely, an issuer
may want to know which dealer representatives are selling their
offering, or how many pending subscriptions a dealer has waiting
for outstanding requirements. Offering documentation, subscriber
lists, KYC forms and dealer agreements are stored within the
system - but not all of that information is shared between dealer
and issuer. For example, an issuer shouldn’t need access to the
KYC of a particular subscriber as that is a dealer function.
Exempt Logic connects these two groups - allowing them
to see and share information in real time, with the same type of
privacy and security that banking systems use.
There is no platform or product that allows an exempt market
dealer to report on their client assets and provide client statement
reports. CRM programs don’t help you meet your regulatory
requirements. They don’t have compliance checks or Know Your
Client (KYC) functionality. Our platform allows a dealer to upload
20 Questions with Exempt Logic founder Sheldon Stier
Why did you create Exempt Logic? What was the need
that you saw in the exempt market industry? 1
What does Exempt Logic do? 2
Q & A
EXEMPT MARKET TECHNOLOGY
How is this different from CRM (client relationship
management) or other software in the market? 3