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Motion Acquisition Corp. and DocGo Announce DocGo’s Record Preliminary First Quarter 2021 Results

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Revenue more than triples from prior year to $49 million

DocGo raises full-year revenue outlook

NEW YORK, April 28, 2021 /PRNewswire/ — Motion Acquisition Corp. (“Motion”) (Nasdaq: MOTN), a publicly traded special purpose acquisition company, announced today that its merger partner Ambulnz, Inc., dba DocGo, a leading provider of last-mile telehealth and integrated medical mobility services, has disclosed select preliminary unaudited financial results for its first quarter ended March 31, 2021.

“In the first quarter, our TeleHealth Plus and mobility offerings continued to deliver tremendous value for our customers and the patients in their care,” said Stan Vashovsky, CEO of DocGo.  “As a result of strong demand for our services, we exceeded our internal forecast for the period with a more than three-fold increase in revenue to a record level.  We expect favorable business conditions to continue, and we are raising our revenue outlook for the full year.”

Preliminary First Quarter 2021 Financial Highlights and Full-Year Revenue Outlook

  • Total revenue was an estimated $49.6 million in the first quarter of 2021, representing a 270% increase from $13.4 million in the first quarter of 2020.
  • Excluding COVID-related testing, revenue more than doubled year-over-year, with momentum expected to continue in the core business.
  • Telehealth Plus revenue increased to nearly $30 million in the first quarter of 2021, compared to $0.5 million in the prior-year period.
  • Net loss for the first quarter of 2021 narrowed significantly to $1.7 million from $6.0 million in the first quarter of last year. Profitability on an Adjusted EBITDA basis was $0.7 million in the first quarter of 2021 despite significant investments made in regional expansion and personnel, versus an Adjusted EBITDA loss of $4.5 million in the prior-year period.
  • As a result of the record first quarter 2021 revenue performance and positive business trends expected for the balance of the year, DocGo is raising its outlook for full-year 2021 revenue to at least $160 million, compared to its prior outlook for 2021 revenue of $155 million.

First Quarter 2021 Business Highlights

  • Expanded TeleHealth Plus offerings, with home visit programs for Long Island Select Healthcare in New York and Martin Luther King Hospital in Los Angeles. Under both programs, DocGo provides a wide range of in-home, last-mile telehealth services.
  • Helped bring live sports back to NYC by providing in-arena medical services and COVID testing at Madison Square Garden, Barclays Center, Citi Field and Nassau Coliseum.
  • Completed rollout of 40 mobile testing units for NYC Health + Hospitals and NYC Test & Trace Corps, and became a leading facilitator of COVID vaccinations in New York State.
  • Launched medical transport services in Wisconsin to provide improved transportation experience for Fresenius Medical Care North America kidney dialysis patients.

“We are impressed with DocGo’s preliminary results for the first quarter, which reflect the tremendous strength of the company’s reach and relationships with its customers,” stated Michael Burdiek, Chief Executive Officer of Motion. “We believe that DocGo is well-positioned for continued long-term growth, and these results reaffirm our confidence in the long-term value that we believe DocGo will provide to its shareholders.”

The foregoing unaudited preliminary financial results represent the most current information available to DocGo and are based on calculations or figures prepared internally that have not yet been reviewed or audited by DocGo’s independent registered public accounting firm.  DocGo plans to provide its full financial results for the first quarter of 2021 in a registration statement on Form S-4 relating to the proposed business combination.   Actual first quarter financial results may be materially different from the preliminary results described above and are subject to the risk factors and uncertainties identified in this press release and in the filings with the Securities and Exchange Commission (SEC) that will be made by Motion and DocGo.

About DocGo

DocGo is a leading provider of last-mile telehealth and integrated medical mobility services. DocGo is disrupting the traditional four-wall healthcare system by providing care at the scale of humanity. DocGo’s innovative technology and dedicated field staff of certified health professionals elevate the quality of patient care and drive business efficiencies for facilities, hospital networks and health insurance providers. With TeleHealth Plus, DocGo empowers the full promise and potential of telehealth by facilitating healthcare treatment, in tandem with a remote physician, in the comfort of a patient’s home or workplace. Together with DocGo’s integrated Ambulnz transportation services, DocGo is bridging the gap between physical and virtual care. DocGo recently announced that it entered into a definitive business combination agreement with Motion Acquisition Corp. (Nasdaq: MOTN), a publicly traded special purpose acquisition company.  Upon closing of the transaction, the combined company will operate under the DocGo name and will be listed on Nasdaq under the new ticker symbol “DCGO”.  For more information, please visit www.docgo.com.

About Motion Acquisition Corp.

Motion Acquisition Corp. is a special purpose acquisition company (SPAC) formed for the purpose of effecting a business combination with one or more target businesses or entities. Motion was founded by a management team and board comprised of seasoned business executives recognized as pioneers in the transportation software and technology sector that possess substantial operating and acquisition experience. Motion is listed on Nasdaq under the ticker symbol “MOTN.” For more information, please visit https://motionacquisition.com.

Non-GAAP Financial Measure

“GAAP” refers to financial information presented in accordance with U.S. Generally Accepted Accounting Principles. This announcement includes a non-GAAP financial measure as defined in Regulation G promulgated by the SEC. We believe that our presentation of a non-GAAP financial measure provides useful supplementary information to investors. This non-GAAP financial measure is provided in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP.  In this announcement, we report the non-GAAP financial measure of Adjusted EBITDA, which we define as earnings before investment income, interest expense, taxes, depreciation, amortization, stock-based compensation, litigation provisions and merger-related expenses.  We use this non-GAAP financial measure to provide investors with additional information about our financial performance and future prospects of our core business activities. Internally, this non-GAAP measure is used by management for purposes of evaluating our core operating performance, establishing internal budgets, calculating return on investment for development programs and growth initiatives, comparing performance with internal forecasts, strategic planning, evaluating and valuing potential acquisition candidates and how their operations compare to our operations, and benchmarking performance externally against our competitors. We believe this non-GAAP financial information provides additional insight into our financial performance and have therefore chosen to provide this information to investors to help them evaluate our results of operations and enhance the ability to make period-to-period comparisons.

Cautionary Statement Regarding Preliminary Estimated Results

The preliminary estimated results for DocGo’s first quarter ended March 31, 2021 are preliminary, unaudited and subject to completion. They reflect DocGo management’s current views and may change as a result of DocGo’s further review of results and other factors, including a wide variety of significant business, economic and competitive risks and uncertainties. Such preliminary results are subject to the finalization, and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with GAAP.  Motion and DocGo caution you that these preliminary results are not guarantees of future performance or outcomes, and that actual results may differ materially from those described above. For more information regarding factors that could cause actual results to differ from those described above, please see “Cautionary Statement Regarding Forward-Looking Statements” below.

The preliminary estimated results have been prepared by, and are the responsibility of, DocGo’s management. DocGo’s independent registered public accounting firm has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary estimated financial information, and does not express an opinion or any other form of assurance with respect thereto.

Cautionary Statement Regarding Forward-Looking Statements

This announcement contains forward-looking statements (including within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended) concerning DocGo. These statements include, but are not limited to, statements that address our expected future business and financial performance and statements about (i) our plans, objectives and intentions with respect to future operations, services and products, (ii)  our competitive position and opportunities, and (iii) other statements identified by words such as “may”, “will”, “expect”, “intend”, “plan”, “potential”, “believe”, “seek”, “could”, “estimate”, “judgment”, “targeting”, “should”, “anticipate”, “predict” “project”, “aim”, “goal”, “outlook”, “guidance”, and similar words, phrases or expressions. These forward-looking statements are based on management’s current expectations and beliefs, as well as assumptions made by, and information currently available to, management, and current market trends and conditions.  Forward-looking statements inherently involve risks and uncertainties, many of which are beyond our control, and which may cause actual results to differ materially from those contained in our forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect current or future results include possible accounting adjustments made in the process of finalizing reported financial results; any risks associated with global economic conditions and concerns; the effects of global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the coronavirus (COVID-19) pandemic; competitive pressures; pricing declines; rates of growth in our target markets; our ability to improve gross margins; cost-containment measures; legislative and regulatory actions; the impact of legal proceedings and compliance risks; the impact on our business and reputation in the event of information technology system failures, network disruptions, cyber-attacks, or losses or unauthorized access to, or release of, confidential information; and the ability of the company to comply with laws and regulations regarding data privacy and protection. We undertake no intent or obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information and Where to Find It

This press release relates to a proposed transaction between DocGo and Motion. Motion intends to file a registration statement on Form S-4 with the SEC, which will include a document that serves as a prospectus and proxy statement of Motion, referred to as a proxy statement/prospectus, and certain related documents, to be used at the meeting of Motion stockholders to approve the proposed business combination and related matters. Investors and security holders of Motion are urged to read the registration statement, the proxy statement/prospectus, and any amendments thereto, and all other relevant documents filed or that will be filed with the SEC in connection with the proposed transaction as they become available because they will contain important information about DocGo, Motion, and the proposed transaction. The definitive proxy statement will be mailed to Motion stockholders as of a record date to be established for voting on the proposed business combination. Investors and security holders will be able to obtain free copies of the registration statement, the proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by Motion, once such documents are filed, through the website maintained by the SEC at www.sec.gov.

The documents filed by Motion with the SEC also may be obtained free of charge at Motion’s website at https://motionacquisition.com or upon written request to Motion’s counsel, Graubard Miller, 405 Lexington Avenue, New York, NY 10174.  The information contained on, or that may be accessed through, the websites referenced in this press release is not incorporated by reference into, and is not a part of, this press release.

Participants in Solicitation

Motion, DocGo, and certain of their respective directors and executive officers, under SEC rules, may be deemed to be participants in the eventual solicitation of proxies from Motion’s stockholders in connection with the proposed transaction. A list of the names of such directors and executive officers and information regarding their interests in the proposed business combination will be contained in the proxy statement/prospectus when available. You may obtain free copies of these documents as described in the preceding paragraph.

No Offer or Solicitation

This press release shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed transaction. This press release also shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such other jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Investor Contacts:
Blueshirt Capital Advisors
Jonathan Schaffer / Michael Anderson
[email protected]

Media Contact:
Ahron Weiner
DocGo
[email protected]
516-244-4168

Source: PR NewswireMotion Acquisition Corp. and DocGo Announce DocGo’s Record Preliminary First Quarter 2021 Results

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Senate banking hearing grills Gensler on SEC regs, crypto, retail investing, and more

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Tuesday morning, the Senate Banking Committee held an oversight with the Securities Exchange Commission’s Chairman Gary Gensler.

A bipartisan group of senators questioned Gensler’s regulatory intentions on topics from cryptocurrency to retail investing.

Gensler began by speaking with board Chairman Sen. Sherrod Brown (D-OH), reporting his staff was researching the dangers of SPACS.

But as ranking member Sen. Pat Toomey (R- PA) took the talking stick, he went right into Payment for Order Flow (PFOF). 

“I worry you would favor the paternalistic push by some on the left to restrict investor freedom under the guise of protection while actually harming retail investors; such harm may result in the form of your opposition to Payment for Order Flow,” Toomey said.

“Banning Payment for Order Flow could very well have the effect of eliminating commission-free investing, which would be a great disservice to average investors.”

Toomey’s point comes from the idea that PFOF has enabled the best time ever to be a retail investor in America.

Through commission-free trading, no minimum balances, low or no-fee mutual funds ETFs, and user-friendly tech-like mobile apps, Toomey said investors could take part in the profits of Wall Street like never before.

Securities Exchange Commission’s Chairman Gary Gensler. | CSPAN

Payment for order flow

Gensler said his biggest worry about the equity market was competition and consolidation. While retail investing has taken off, the PFOF that enables it is ripe for conflict of interest: he said more than half of all PFOF trades go into one big pool. 

“Nearly half of the volume transacted is executed in “dark pools” or by wholesalers. I wonder whether this means that the consolidated tape — the so-called National Best Bid and Offer — fully reflects the full range of activity on exchanges,” Gensler said in testimony.

“As I have stated previously, I believe payment for order flow and exchange rebates may present a number of conflicts of interest.”

Retail investors have flocked to products like Robinhood, which offers fee-less and fractional investing in stocks, and securities, by selling their customer’s trades to partner market makers instead of “actually” posting them on the true securities markets.

The practice, pioneered by Bernie Madoff, printed $2.5 billion in 2020 for top trading firms like T.D. Ameritrade, Robinhood, and Charles Swab.

Feeless trading would disappear

The majority of fees collected come from options trades in small amounts of $.50 at a time. Without it, Toomey and others argue feeless trading would disappear overnight, and so would retail investing. 

In March, PFOF became a retail investor rallying cry when Robinhood shut down trading of Gamestop to cover a change in its own market maker deposit requirements.

To some, it looked like PFOF had enabled hedge funds to shut down orders that were losing them money by requiring Robinhood to foot the bill. But, ironically, PFOF is the only reason retail investors got into Gamestop in the first place. 

SenatorJack Reed (D-RI) went into PFOF, asking Gensler, “is the owner of these securities getting the best deal?”

“I think it may make our markets less efficient; retail traders may not be getting the best execution even if with a price improvement [feeless trading,]” Gensler said.

“If anyone on this Commission or this staff makes a trade on these platforms, it is 97 per cent chance that it does not go to an exchange; it goes to dark markets and secondary sale.”

As Gensler later went on to tell Senator Tim Scott (R-SC): the goal is to encourage more competition in the investing order market, not less. In addition, he hopes to find a way to shorten the settlement cycle, to leave traders less exposed. 

“Technology has driven down the cost of investing, but there’s still a cost left PFOF, even a couple of pennies out there is still a cost,” Gensler said.

“What I have raised with Jennifer Leete: we can we do better with more competition, rather than one reseller buying half the orders in America. I think we will try to drive it down to an even lower cost.”

Leete was appointed as Associate Director in Enforcement in the SEC in 2020, with 20 years of experience supervising cases against convicted trading order fraudsters at the SEC.

Cryptocurrency security regulation

As Toomey first brought up and jumped into during his question period, Gensler has recently made it clear he believed some cryptocurrency products were securities and needed to be regulated. The senator said he would like to see more public guidance. 

“So I’m frustrated by the lack of helpful SEC public guidance, explaining how you make this distinction: What makes some of them securities while others are not,” Toomey said. “Why not publicly announce what characteristics make the cryptocurrency?”

Toomey referred to stable coins, crypto-assets founded with the goal of stability to govern exchanges and offer liquidity as non-securities. However, if they don’t have an “expectation of profit on the investment,” they don’t beat the Howey test for securities, and in Toomey’s book, they are not securities. 

“As Thurgood Marshall wrote in the Reves opinion, in defining the scope of the market that it — Congress wished to regulate — Congress painted a broad brush, and it actually included about 35 different things inside the definition of a security,” Gensler said.

“Senator, this, this congress could change the laws, but the laws that we have right now have a very broad definition of a security, including a note, including an investment contract, and the like.”

Without naming names, the senator had referenced last week’s news that Coinbase’s USDC savings product had come under fire from the SEC for unregulated security fears.

Coinbase, through CEO Brian Armstrong, took up arms via Twitter posts and claimed they had no idea why their money market bank loan product was being considered a security.

The SEC has been known to work privately with firms that aim to create securities or investment products.

How to get away with security

Though believing that some stable coins are fair game, in general, Gensler thinks his hands are tied: most cryptocurrencies are investment products.

“I agree with you that, that some of these tokens have been deemed to be commodities, many of them are securities, and the Supreme Court has weighed in a number of times you noted, the Howey Test,” Gensler said. 

The Howie test comes from a Supreme Court decision in 1946 between a Florida orange grove owner selling speculative land and the SEC. The SCOTUS ruled that Howie was violating the rules set down in the 1933 Securities act, defining an ‘”investment contract” exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Under this ruling, if it is advertised to make money on money, it is a security. 

The Senator and Gensler brought up the Reves test, another securities law case decided in 1990 concerning an Arkansas co-op farm “investment” shares. The SCOTUS found the promissory notes were securities and thus violated the ’33 act.

However, after 60 years of innovation that had created many financial products, the Reves case had to be more technical. Basically, to cover all the new products, the SCOTUS stated that anything marketed like SEC-compliant security or resembled one would have to be SEC-compliant: the average investor expected that the SEC would check investment products for fraud. 

Gensler said he believes the Senate and House can change the laws, but he interprets the 1933 Securities to act as a broad set of rules that he must follow regarding security regulation.

He said that many things have become classified as securities at times, including whiskey barrels bought with speculative intent in the 1960s— which is true.

“I’m not negative or minimalist about crypto; I am technology-neutral, Gensler said. “I think that this technology has been and can continue to be a catalyst for change, but technologies don’t last long if they stay outside of the regulatory framework.”

In other news

Aside from arguing over cryptocurrency and retail investing, Gensler presented two goals for the SEC. One, to release new cyber security “hygiene” guidelines in the coming months for firms to follow in the age of ransomware hacking attacks.

Gensler agreed with Sen Jon Tester (D – MT), who said cyber security was a dire challenge facing American businesses like climate change. 

“I couldn’t agree with you more. So there are two lists we’re looking at: how are you managing your cyber risk because it’s a real risk, how are you governing and managing it, and what are your costs for cyber hygiene,” Gensler said. “Secondly is incident reporting, if you have a breach, and you’re paying ransomware and the like.”

Two, as Gensler made clear in a Wall Street Jornal Op-Ed Tuesday morning: the U.S. intends to increase oversite into the financial activities of Chinese companies tenfold.

Under new laws passed by the Senate, Chinese companies must open their books to U.S. audit within a new three-year timeframe. Gensler said that if they refuse, the companies will be barred from trade and U.S. stock exchanges.  

“The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024.

The reason can be traced to the Enron and WorldCom accounting scandals,” Gensler wrote in an Op-Ed. “Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.”

Gensler said last year Congress passed the Holding Foreign Companies accountable act, which prohibits trading a foreign-issued stock if the US oversight board can’t inspect or audit the firm. It does not have to be a US-based firm that performs the audit, but someone has to audit every three years, or you’re out. 



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Source: https://www.lendacademy.com/senate-banking-hearing-grills-gensler-on-sec-regulation-crypto-retail-investing-and-more/

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Senate banking hearing grills Gensler on SEC regs, crypto, retail investing, and more

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Tuesday morning, the Senate Banking Committee held an oversight with the Securities Exchange Commission’s Chairman Gary Gensler.

A bipartisan group of senators questioned Gensler’s regulatory intentions on topics from cryptocurrency to retail investing.

Gensler began by speaking with board Chairman Sen. Sherrod Brown (D-OH), reporting his staff was researching the dangers of SPACS.

But as ranking member Sen. Pat Toomey (R- PA) took the talking stick, he went right into Payment for Order Flow (PFOF). 

“I worry you would favor the paternalistic push by some on the left to restrict investor freedom under the guise of protection while actually harming retail investors; such harm may result in the form of your opposition to Payment for Order Flow,” Toomey said.

“Banning Payment for Order Flow could very well have the effect of eliminating commission-free investing, which would be a great disservice to average investors.”

Toomey’s point comes from the idea that PFOF has enabled the best time ever to be a retail investor in America.

Through commission-free trading, no minimum balances, low or no-fee mutual funds ETFs, and user-friendly tech-like mobile apps, Toomey said investors could take part in the profits of Wall Street like never before.

Securities Exchange Commission’s Chairman Gary Gensler. | CSPAN

Payment for order flow

Gensler said his biggest worry about the equity market was competition and consolidation. While retail investing has taken off, the PFOF that enables it is ripe for conflict of interest: he said more than half of all PFOF trades go into one big pool. 

“Nearly half of the volume transacted is executed in “dark pools” or by wholesalers. I wonder whether this means that the consolidated tape — the so-called National Best Bid and Offer — fully reflects the full range of activity on exchanges,” Gensler said in testimony.

“As I have stated previously, I believe payment for order flow and exchange rebates may present a number of conflicts of interest.”

Retail investors have flocked to products like Robinhood, which offers fee-less and fractional investing in stocks, and securities, by selling their customer’s trades to partner market makers instead of “actually” posting them on the true securities markets.

The practice, pioneered by Bernie Madoff, printed $2.5 billion in 2020 for top trading firms like T.D. Ameritrade, Robinhood, and Charles Swab.

Feeless trading would disappear

The majority of fees collected come from options trades in small amounts of $.50 at a time. Without it, Toomey and others argue feeless trading would disappear overnight, and so would retail investing. 

In March, PFOF became a retail investor rallying cry when Robinhood shut down trading of Gamestop to cover a change in its own market maker deposit requirements.

To some, it looked like PFOF had enabled hedge funds to shut down orders that were losing them money by requiring Robinhood to foot the bill. But, ironically, PFOF is the only reason retail investors got into Gamestop in the first place. 

SenatorJack Reed (D-RI) went into PFOF, asking Gensler, “is the owner of these securities getting the best deal?”

“I think it may make our markets less efficient; retail traders may not be getting the best execution even if with a price improvement [feeless trading,]” Gensler said.

“If anyone on this Commission or this staff makes a trade on these platforms, it is 97 per cent chance that it does not go to an exchange; it goes to dark markets and secondary sale.”

As Gensler later went on to tell Senator Tim Scott (R-SC): the goal is to encourage more competition in the investing order market, not less. In addition, he hopes to find a way to shorten the settlement cycle, to leave traders less exposed. 

“Technology has driven down the cost of investing, but there’s still a cost left PFOF, even a couple of pennies out there is still a cost,” Gensler said.

“What I have raised with Jennifer Leete: we can we do better with more competition, rather than one reseller buying half the orders in America. I think we will try to drive it down to an even lower cost.”

Leete was appointed as Associate Director in Enforcement in the SEC in 2020, with 20 years of experience supervising cases against convicted trading order fraudsters at the SEC.

Cryptocurrency security regulation

As Toomey first brought up and jumped into during his question period, Gensler has recently made it clear he believed some cryptocurrency products were securities and needed to be regulated. The senator said he would like to see more public guidance. 

“So I’m frustrated by the lack of helpful SEC public guidance, explaining how you make this distinction: What makes some of them securities while others are not,” Toomey said. “Why not publicly announce what characteristics make the cryptocurrency?”

Toomey referred to stable coins, crypto-assets founded with the goal of stability to govern exchanges and offer liquidity as non-securities. However, if they don’t have an “expectation of profit on the investment,” they don’t beat the Howey test for securities, and in Toomey’s book, they are not securities. 

“As Thurgood Marshall wrote in the Reves opinion, in defining the scope of the market that it — Congress wished to regulate — Congress painted a broad brush, and it actually included about 35 different things inside the definition of a security,” Gensler said.

“Senator, this, this congress could change the laws, but the laws that we have right now have a very broad definition of a security, including a note, including an investment contract, and the like.”

Without naming names, the senator had referenced last week’s news that Coinbase’s USDC savings product had come under fire from the SEC for unregulated security fears.

Coinbase, through CEO Brian Armstrong, took up arms via Twitter posts and claimed they had no idea why their money market bank loan product was being considered a security.

The SEC has been known to work privately with firms that aim to create securities or investment products.

How to get away with security

Though believing that some stable coins are fair game, in general, Gensler thinks his hands are tied: most cryptocurrencies are investment products.

“I agree with you that, that some of these tokens have been deemed to be commodities, many of them are securities, and the Supreme Court has weighed in a number of times you noted, the Howey Test,” Gensler said. 

The Howie test comes from a Supreme Court decision in 1946 between a Florida orange grove owner selling speculative land and the SEC. The SCOTUS ruled that Howie was violating the rules set down in the 1933 Securities act, defining an ‘”investment contract” exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Under this ruling, if it is advertised to make money on money, it is a security. 

The Senator and Gensler brought up the Reves test, another securities law case decided in 1990 concerning an Arkansas co-op farm “investment” shares. The SCOTUS found the promissory notes were securities and thus violated the ’33 act.

However, after 60 years of innovation that had created many financial products, the Reves case had to be more technical. Basically, to cover all the new products, the SCOTUS stated that anything marketed like SEC-compliant security or resembled one would have to be SEC-compliant: the average investor expected that the SEC would check investment products for fraud. 

Gensler said he believes the Senate and House can change the laws, but he interprets the 1933 Securities to act as a broad set of rules that he must follow regarding security regulation.

He said that many things have become classified as securities at times, including whiskey barrels bought with speculative intent in the 1960s— which is true.

“I’m not negative or minimalist about crypto; I am technology-neutral, Gensler said. “I think that this technology has been and can continue to be a catalyst for change, but technologies don’t last long if they stay outside of the regulatory framework.”

In other news

Aside from arguing over cryptocurrency and retail investing, Gensler presented two goals for the SEC. One, to release new cyber security “hygiene” guidelines in the coming months for firms to follow in the age of ransomware hacking attacks.

Gensler agreed with Sen Jon Tester (D – MT), who said cyber security was a dire challenge facing American businesses like climate change. 

“I couldn’t agree with you more. So there are two lists we’re looking at: how are you managing your cyber risk because it’s a real risk, how are you governing and managing it, and what are your costs for cyber hygiene,” Gensler said. “Secondly is incident reporting, if you have a breach, and you’re paying ransomware and the like.”

Two, as Gensler made clear in a Wall Street Jornal Op-Ed Tuesday morning: the U.S. intends to increase oversite into the financial activities of Chinese companies tenfold.

Under new laws passed by the Senate, Chinese companies must open their books to U.S. audit within a new three-year timeframe. Gensler said that if they refuse, the companies will be barred from trade and U.S. stock exchanges.  

“The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024.

The reason can be traced to the Enron and WorldCom accounting scandals,” Gensler wrote in an Op-Ed. “Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.”

Gensler said last year Congress passed the Holding Foreign Companies accountable act, which prohibits trading a foreign-issued stock if the US oversight board can’t inspect or audit the firm. It does not have to be a US-based firm that performs the audit, but someone has to audit every three years, or you’re out. 



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Source: https://www.lendacademy.com/senate-banking-hearing-grills-gensler-on-sec-regulation-crypto-retail-investing-and-more/

Continue Reading

Crowdfunding

Senate banking hearing grills Gensler on SEC regs, crypto, retail investing, and more

Published

on

Tuesday morning, the Senate Banking Committee held an oversight with the Securities Exchange Commission’s Chairman Gary Gensler.

A bipartisan group of senators questioned Gensler’s regulatory intentions on topics from cryptocurrency to retail investing.

Gensler began by speaking with board Chairman Sen. Sherrod Brown (D-OH), reporting his staff was researching the dangers of SPACS.

But as ranking member Sen. Pat Toomey (R- PA) took the talking stick, he went right into Payment for Order Flow (PFOF). 

“I worry you would favor the paternalistic push by some on the left to restrict investor freedom under the guise of protection while actually harming retail investors; such harm may result in the form of your opposition to Payment for Order Flow,” Toomey said.

“Banning Payment for Order Flow could very well have the effect of eliminating commission-free investing, which would be a great disservice to average investors.”

Toomey’s point comes from the idea that PFOF has enabled the best time ever to be a retail investor in America.

Through commission-free trading, no minimum balances, low or no-fee mutual funds ETFs, and user-friendly tech-like mobile apps, Toomey said investors could take part in the profits of Wall Street like never before.

Securities Exchange Commission’s Chairman Gary Gensler. | CSPAN

Payment for order flow

Gensler said his biggest worry about the equity market was competition and consolidation. While retail investing has taken off, the PFOF that enables it is ripe for conflict of interest: he said more than half of all PFOF trades go into one big pool. 

“Nearly half of the volume transacted is executed in “dark pools” or by wholesalers. I wonder whether this means that the consolidated tape — the so-called National Best Bid and Offer — fully reflects the full range of activity on exchanges,” Gensler said in testimony.

“As I have stated previously, I believe payment for order flow and exchange rebates may present a number of conflicts of interest.”

Retail investors have flocked to products like Robinhood, which offers fee-less and fractional investing in stocks, and securities, by selling their customer’s trades to partner market makers instead of “actually” posting them on the true securities markets.

The practice, pioneered by Bernie Madoff, printed $2.5 billion in 2020 for top trading firms like T.D. Ameritrade, Robinhood, and Charles Swab.

Feeless trading would disappear

The majority of fees collected come from options trades in small amounts of $.50 at a time. Without it, Toomey and others argue feeless trading would disappear overnight, and so would retail investing. 

In March, PFOF became a retail investor rallying cry when Robinhood shut down trading of Gamestop to cover a change in its own market maker deposit requirements.

To some, it looked like PFOF had enabled hedge funds to shut down orders that were losing them money by requiring Robinhood to foot the bill. But, ironically, PFOF is the only reason retail investors got into Gamestop in the first place. 

SenatorJack Reed (D-RI) went into PFOF, asking Gensler, “is the owner of these securities getting the best deal?”

“I think it may make our markets less efficient; retail traders may not be getting the best execution even if with a price improvement [feeless trading,]” Gensler said.

“If anyone on this Commission or this staff makes a trade on these platforms, it is 97 per cent chance that it does not go to an exchange; it goes to dark markets and secondary sale.”

As Gensler later went on to tell Senator Tim Scott (R-SC): the goal is to encourage more competition in the investing order market, not less. In addition, he hopes to find a way to shorten the settlement cycle, to leave traders less exposed. 

“Technology has driven down the cost of investing, but there’s still a cost left PFOF, even a couple of pennies out there is still a cost,” Gensler said.

“What I have raised with Jennifer Leete: we can we do better with more competition, rather than one reseller buying half the orders in America. I think we will try to drive it down to an even lower cost.”

Leete was appointed as Associate Director in Enforcement in the SEC in 2020, with 20 years of experience supervising cases against convicted trading order fraudsters at the SEC.

Cryptocurrency security regulation

As Toomey first brought up and jumped into during his question period, Gensler has recently made it clear he believed some cryptocurrency products were securities and needed to be regulated. The senator said he would like to see more public guidance. 

“So I’m frustrated by the lack of helpful SEC public guidance, explaining how you make this distinction: What makes some of them securities while others are not,” Toomey said. “Why not publicly announce what characteristics make the cryptocurrency?”

Toomey referred to stable coins, crypto-assets founded with the goal of stability to govern exchanges and offer liquidity as non-securities. However, if they don’t have an “expectation of profit on the investment,” they don’t beat the Howey test for securities, and in Toomey’s book, they are not securities. 

“As Thurgood Marshall wrote in the Reves opinion, in defining the scope of the market that it — Congress wished to regulate — Congress painted a broad brush, and it actually included about 35 different things inside the definition of a security,” Gensler said.

“Senator, this, this congress could change the laws, but the laws that we have right now have a very broad definition of a security, including a note, including an investment contract, and the like.”

Without naming names, the senator had referenced last week’s news that Coinbase’s USDC savings product had come under fire from the SEC for unregulated security fears.

Coinbase, through CEO Brian Armstrong, took up arms via Twitter posts and claimed they had no idea why their money market bank loan product was being considered a security.

The SEC has been known to work privately with firms that aim to create securities or investment products.

How to get away with security

Though believing that some stable coins are fair game, in general, Gensler thinks his hands are tied: most cryptocurrencies are investment products.

“I agree with you that, that some of these tokens have been deemed to be commodities, many of them are securities, and the Supreme Court has weighed in a number of times you noted, the Howey Test,” Gensler said. 

The Howie test comes from a Supreme Court decision in 1946 between a Florida orange grove owner selling speculative land and the SEC. The SCOTUS ruled that Howie was violating the rules set down in the 1933 Securities act, defining an ‘”investment contract” exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Under this ruling, if it is advertised to make money on money, it is a security. 

The Senator and Gensler brought up the Reves test, another securities law case decided in 1990 concerning an Arkansas co-op farm “investment” shares. The SCOTUS found the promissory notes were securities and thus violated the ’33 act.

However, after 60 years of innovation that had created many financial products, the Reves case had to be more technical. Basically, to cover all the new products, the SCOTUS stated that anything marketed like SEC-compliant security or resembled one would have to be SEC-compliant: the average investor expected that the SEC would check investment products for fraud. 

Gensler said he believes the Senate and House can change the laws, but he interprets the 1933 Securities to act as a broad set of rules that he must follow regarding security regulation.

He said that many things have become classified as securities at times, including whiskey barrels bought with speculative intent in the 1960s— which is true.

“I’m not negative or minimalist about crypto; I am technology-neutral, Gensler said. “I think that this technology has been and can continue to be a catalyst for change, but technologies don’t last long if they stay outside of the regulatory framework.”

In other news

Aside from arguing over cryptocurrency and retail investing, Gensler presented two goals for the SEC. One, to release new cyber security “hygiene” guidelines in the coming months for firms to follow in the age of ransomware hacking attacks.

Gensler agreed with Sen Jon Tester (D – MT), who said cyber security was a dire challenge facing American businesses like climate change. 

“I couldn’t agree with you more. So there are two lists we’re looking at: how are you managing your cyber risk because it’s a real risk, how are you governing and managing it, and what are your costs for cyber hygiene,” Gensler said. “Secondly is incident reporting, if you have a breach, and you’re paying ransomware and the like.”

Two, as Gensler made clear in a Wall Street Jornal Op-Ed Tuesday morning: the U.S. intends to increase oversite into the financial activities of Chinese companies tenfold.

Under new laws passed by the Senate, Chinese companies must open their books to U.S. audit within a new three-year timeframe. Gensler said that if they refuse, the companies will be barred from trade and U.S. stock exchanges.  

“The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024.

The reason can be traced to the Enron and WorldCom accounting scandals,” Gensler wrote in an Op-Ed. “Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.”

Gensler said last year Congress passed the Holding Foreign Companies accountable act, which prohibits trading a foreign-issued stock if the US oversight board can’t inspect or audit the firm. It does not have to be a US-based firm that performs the audit, but someone has to audit every three years, or you’re out. 



PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
Click here to access.

Source: https://www.lendacademy.com/senate-banking-hearing-grills-gensler-on-sec-regulation-crypto-retail-investing-and-more/

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Senate banking hearing grills Gensler on SEC regs, crypto, retail investing, and more

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Tuesday morning, the Senate Banking Committee held an oversight with the Securities Exchange Commission’s Chairman Gary Gensler.

A bipartisan group of senators questioned Gensler’s regulatory intentions on topics from cryptocurrency to retail investing.

Gensler began by speaking with board Chairman Sen. Sherrod Brown (D-OH), reporting his staff was researching the dangers of SPACS.

But as ranking member Sen. Pat Toomey (R- PA) took the talking stick, he went right into Payment for Order Flow (PFOF). 

“I worry you would favor the paternalistic push by some on the left to restrict investor freedom under the guise of protection while actually harming retail investors; such harm may result in the form of your opposition to Payment for Order Flow,” Toomey said.

“Banning Payment for Order Flow could very well have the effect of eliminating commission-free investing, which would be a great disservice to average investors.”

Toomey’s point comes from the idea that PFOF has enabled the best time ever to be a retail investor in America.

Through commission-free trading, no minimum balances, low or no-fee mutual funds ETFs, and user-friendly tech-like mobile apps, Toomey said investors could take part in the profits of Wall Street like never before.

Securities Exchange Commission’s Chairman Gary Gensler. | CSPAN

Payment for order flow

Gensler said his biggest worry about the equity market was competition and consolidation. While retail investing has taken off, the PFOF that enables it is ripe for conflict of interest: he said more than half of all PFOF trades go into one big pool. 

“Nearly half of the volume transacted is executed in “dark pools” or by wholesalers. I wonder whether this means that the consolidated tape — the so-called National Best Bid and Offer — fully reflects the full range of activity on exchanges,” Gensler said in testimony.

“As I have stated previously, I believe payment for order flow and exchange rebates may present a number of conflicts of interest.”

Retail investors have flocked to products like Robinhood, which offers fee-less and fractional investing in stocks, and securities, by selling their customer’s trades to partner market makers instead of “actually” posting them on the true securities markets.

The practice, pioneered by Bernie Madoff, printed $2.5 billion in 2020 for top trading firms like T.D. Ameritrade, Robinhood, and Charles Swab.

Feeless trading would disappear

The majority of fees collected come from options trades in small amounts of $.50 at a time. Without it, Toomey and others argue feeless trading would disappear overnight, and so would retail investing. 

In March, PFOF became a retail investor rallying cry when Robinhood shut down trading of Gamestop to cover a change in its own market maker deposit requirements.

To some, it looked like PFOF had enabled hedge funds to shut down orders that were losing them money by requiring Robinhood to foot the bill. But, ironically, PFOF is the only reason retail investors got into Gamestop in the first place. 

SenatorJack Reed (D-RI) went into PFOF, asking Gensler, “is the owner of these securities getting the best deal?”

“I think it may make our markets less efficient; retail traders may not be getting the best execution even if with a price improvement [feeless trading,]” Gensler said.

“If anyone on this Commission or this staff makes a trade on these platforms, it is 97 per cent chance that it does not go to an exchange; it goes to dark markets and secondary sale.”

As Gensler later went on to tell Senator Tim Scott (R-SC): the goal is to encourage more competition in the investing order market, not less. In addition, he hopes to find a way to shorten the settlement cycle, to leave traders less exposed. 

“Technology has driven down the cost of investing, but there’s still a cost left PFOF, even a couple of pennies out there is still a cost,” Gensler said.

“What I have raised with Jennifer Leete: we can we do better with more competition, rather than one reseller buying half the orders in America. I think we will try to drive it down to an even lower cost.”

Leete was appointed as Associate Director in Enforcement in the SEC in 2020, with 20 years of experience supervising cases against convicted trading order fraudsters at the SEC.

Cryptocurrency security regulation

As Toomey first brought up and jumped into during his question period, Gensler has recently made it clear he believed some cryptocurrency products were securities and needed to be regulated. The senator said he would like to see more public guidance. 

“So I’m frustrated by the lack of helpful SEC public guidance, explaining how you make this distinction: What makes some of them securities while others are not,” Toomey said. “Why not publicly announce what characteristics make the cryptocurrency?”

Toomey referred to stable coins, crypto-assets founded with the goal of stability to govern exchanges and offer liquidity as non-securities. However, if they don’t have an “expectation of profit on the investment,” they don’t beat the Howey test for securities, and in Toomey’s book, they are not securities. 

“As Thurgood Marshall wrote in the Reves opinion, in defining the scope of the market that it — Congress wished to regulate — Congress painted a broad brush, and it actually included about 35 different things inside the definition of a security,” Gensler said.

“Senator, this, this congress could change the laws, but the laws that we have right now have a very broad definition of a security, including a note, including an investment contract, and the like.”

Without naming names, the senator had referenced last week’s news that Coinbase’s USDC savings product had come under fire from the SEC for unregulated security fears.

Coinbase, through CEO Brian Armstrong, took up arms via Twitter posts and claimed they had no idea why their money market bank loan product was being considered a security.

The SEC has been known to work privately with firms that aim to create securities or investment products.

How to get away with security

Though believing that some stable coins are fair game, in general, Gensler thinks his hands are tied: most cryptocurrencies are investment products.

“I agree with you that, that some of these tokens have been deemed to be commodities, many of them are securities, and the Supreme Court has weighed in a number of times you noted, the Howey Test,” Gensler said. 

The Howie test comes from a Supreme Court decision in 1946 between a Florida orange grove owner selling speculative land and the SEC. The SCOTUS ruled that Howie was violating the rules set down in the 1933 Securities act, defining an ‘”investment contract” exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Under this ruling, if it is advertised to make money on money, it is a security. 

The Senator and Gensler brought up the Reves test, another securities law case decided in 1990 concerning an Arkansas co-op farm “investment” shares. The SCOTUS found the promissory notes were securities and thus violated the ’33 act.

However, after 60 years of innovation that had created many financial products, the Reves case had to be more technical. Basically, to cover all the new products, the SCOTUS stated that anything marketed like SEC-compliant security or resembled one would have to be SEC-compliant: the average investor expected that the SEC would check investment products for fraud. 

Gensler said he believes the Senate and House can change the laws, but he interprets the 1933 Securities to act as a broad set of rules that he must follow regarding security regulation.

He said that many things have become classified as securities at times, including whiskey barrels bought with speculative intent in the 1960s— which is true.

“I’m not negative or minimalist about crypto; I am technology-neutral, Gensler said. “I think that this technology has been and can continue to be a catalyst for change, but technologies don’t last long if they stay outside of the regulatory framework.”

In other news

Aside from arguing over cryptocurrency and retail investing, Gensler presented two goals for the SEC. One, to release new cyber security “hygiene” guidelines in the coming months for firms to follow in the age of ransomware hacking attacks.

Gensler agreed with Sen Jon Tester (D – MT), who said cyber security was a dire challenge facing American businesses like climate change. 

“I couldn’t agree with you more. So there are two lists we’re looking at: how are you managing your cyber risk because it’s a real risk, how are you governing and managing it, and what are your costs for cyber hygiene,” Gensler said. “Secondly is incident reporting, if you have a breach, and you’re paying ransomware and the like.”

Two, as Gensler made clear in a Wall Street Jornal Op-Ed Tuesday morning: the U.S. intends to increase oversite into the financial activities of Chinese companies tenfold.

Under new laws passed by the Senate, Chinese companies must open their books to U.S. audit within a new three-year timeframe. Gensler said that if they refuse, the companies will be barred from trade and U.S. stock exchanges.  

“The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024.

The reason can be traced to the Enron and WorldCom accounting scandals,” Gensler wrote in an Op-Ed. “Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.”

Gensler said last year Congress passed the Holding Foreign Companies accountable act, which prohibits trading a foreign-issued stock if the US oversight board can’t inspect or audit the firm. It does not have to be a US-based firm that performs the audit, but someone has to audit every three years, or you’re out. 



PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
Click here to access.

Source: https://www.lendacademy.com/senate-banking-hearing-grills-gensler-on-sec-regulation-crypto-retail-investing-and-more/

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