At the DSA Looking Forward conference in DC, we had a great panel discussion with three state regulators. Dale Cantone from Maryland, Dave Irvin from Virginia and Bryan Stirling from South Carolina. They shared some insights about their methods for investigating companies, the behavior that gets their attention and how they collaborate with other agencies across the country. Dale Cantone, who initiated the Equinox lawsuit at the state level (he understands pyramid cases), answered a question I receive often from prospective clients: “Does it help if a new company sends their materials to you before they launch….sort of as a friendly introduction?” The answer, not surprisingly, was “No, it does not help!“
He gave three reasons:
First, it’s not required in Maryland. In five states, it’s required. In those states, it makes sense. In Maryland (and all of the other 45 states), it makes no sense.
Second, they never approve or endorse a business. This is true for most of the other AG departments, including the ones that require registration. Dale stated further, “Our failure to acknowledge your letter should not be considered as an approval of your model.” Translation: They ignore the letters, so it would not be wise for someone to think “well….if they had a problem with the business, we would have heard something by now…”
Third, Dale recognizes that the business presented on paper, particularly the papers mailed to the AG’s office, is oftentimes not the business that’s executed in the public. Without seeing the business in practice, the presentation on paper is just not that relevant for regulators.
Once a business has matured, it’ll eventually make sense for that business to reach out and engage with the local government. It’s obviously very beneficial and important to build relationships in the immediate community. But as stated by Dale and affirmed by his other colleagues, it’s not advantageous to send anything to the state AGs.