Adam Torres and Neil Levine discuss the current regulatory environment.
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Show Notes:
It’s important for companies to surround themselves with the right team to ensure compliance in the current regulatory environment. In this episode, Adam Torres and Neil Levine, Partner & Executive Board Member at Marcum LLP, explore regulation and what leaders of publicly traded companies should know.
About Neil Levine
Neil Levine is a co-managing partner of Friedman LLP’s Southern New Jersey offices, serves on the firm’s management committee and co-leads the firm’s SEC Practice. He has more than 30 years of public accounting experience and directs audit engagements for SEC registrants, privately held companies, not-for-profits, nursing homes and healthcare organizations. Neil has served both developmental and emerging companies as well as old-line businesses.
Prior to joining Friedman LLP, Neil managed his firm’s Public Companies/SEC Practice, organizing its quality control procedures and ensuring that the firm complied with PCAOB regulations. He will continue to provide compliance oversight on audit and accounting standards as well as technical assistance on related matters. He is an expert in managing reporting requirements for small-, mid- and large-cap companies.
About Marcum LLP
Marcum LLP is a national accounting and advisory services firm dedicated to helping entrepreneurial, middle-market companies and high net worth individuals achieve their goals. Since 1951, clients have chosen Marcum for our insightful guidance in helping them forge pathways to success, whatever challenges they’re facing. Marcum offers a complete spectrum of tax, assurance and advisory services. Marcum’s industry-focused practices offer deep insight and specialized services to privately held and publicly registered companies, and nonprofit and social sector organizations. The Firm also provides a full complement of technology, wealth management, and executive search and staffing services.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres and if you’d like to be a guest in the show, just head on over to missionmatters. com and click on be our guest to apply. Okay. So today I have Neil Levine on the line and he is a partner and executive board member over at Markham LLP.
Neil, welcome to the show. Hey, thanks for having me, Adam. It’s always a pleasure. All right, Neil. So I’m, we’re, we’re getting ready for Atlantic City micro cab conference. I think that you’re going to be you’re, you’re moderating the panel. Are you on a panel? Like, tell me a little bit more about what’s going on.
Yeah. So being one of the I’ll say elder statesmen of the account industry at age 62. I’ve been around a long time. I’ve been at many wait, 62, that’s a baby. That’s not, I’m a, that’s not elder statement. Yeah. Well, compared to what I see in the industry. But I’ve done a lot of panels. I’m moderating a panel on, wednesday morning trends in the micro cap space, and I’ve invited some of my friends, both in the legal and other accounting firms to be on the panel. So we always have a good time. Now, do you work often in the micro cap spaces? This 1 of your 1 of your areas of focus. So I guess when I started doing the public work in 1999, I’ll say it was with my own small firm.
I guess we were 35 people and we really were bottom feeder, so to speak. We started off on the pink sheets and the gray sheets and then, you know, the micro cap. So yeah, I enjoy doing that. I enjoy taking some of these micro cap companies up, let them list to the NASDAQ or the New York Stock Exchange.
Yeah, so it’s always fun. It take a small company and bring it to the top. Oh, that’s gotta be cool to see. Like, especially when they start with you and then they, you know, you see the company do well and then they get to, they get to rise up. What what draws you to working with these CEOs and like these and these types of companies?
Like, is there anything specific that just keeps you in the game? Well, you know, with the experience I have, and I’ll say the Rolodex I have, I don’t even know if that’s a term anymore, but it is. I got my, my audiences. My audiences are. See, are you? You’re so what happens? Adam is I’ll get these young companies, young CEOs or CFOs and, you know, to add value.
It’s just not about. Hey, can we do the audit? It’s Levine. I call everybody by last name and say, Levine, can you introduce us to a hedge fund? Or do you have a banker out there that can help us? Or what about an FCC law firm? So, you know, I’d like to bring more to the table than just, hey, we can do this audit and move on to something else.
It’s always try to be something added value. Talk to me a little bit about the current regulatory environment. Anything is in your experience. Is it like, what’s it like right now compared to historically for you? Yeah, so historically, when I had my own firm you know, I was in charge of the PCAOB inspection and we always were happy and we would say, hey, we got no comments.
That’s how I would. Compete against other firms. Now, it’s tougher quality control is paramount for every firm staying up on technology, hiring the right people, you know, Markham just set up their own artificial intelligence. So the regulators are being really difficult and what’s making that difficult for us is the younger generation of today to be a CPA.
You got to get 150 hours of college in, which is a 5 year degree, not a 4 year degree anymore. So, yeah, the regulators, they’re making it difficult. So a firm like Markham with 4400 people, you know, the, the smaller firms are coming to me and saying, Levine, can you buy us? You know, we don’t have the technology.
We don’t have the quality. So, it’s tougher for the workers because we have to do a better job and it’s harder for the smaller firms. To really stay in the business, so you may say, hey, Neil, you know, what’s Mark? I’m doing in a micro conference. You know, you do 600 public companies. You guys have all the companies on NASDAQ your number 5 in the country, but yeah, we take these micro cap companies.
We, you know, go through corporate governance and we really put them on the right road so they can be successful to deal with the regulators because really nobody wants to be in trouble. Nobody wants to lose their license. You know, it’s not like the old days, this is a very difficult regulatory environment.
Yeah. And of the things that’s interesting is I’ve kind of so I’m, I’m newer to well, I should back up a sec. So I’m just for us at least. So, I mean, I was in finance almost 14 years, but I was an advisor. And so I, you know, came at this from a whole different side of like the coin. I’m just looking at the, you know, what the content they’re putting out.
But now, so this is my first time going to the, a micro cap conference or really covering micro cap at all, actually. In terms of like on this side of the coin, so to speak, or this side of the mic, I should say, right. So to go out there. Let’s see what’s to see what CEOs are thinking about right now.
I mean, I I’m newer to that, like for you, I mean, you’ve been doing this a long time and like you just mentioned, you know, insight into 600 plus companies. So I know it’s not a one size fits all, but you know, let’s just say that the temperature, like what’s on the mind of some of the CEOs out there right now, from, from your perspective.
Well, the temperature for the micro cap a CEO would be, hey, we’re a smaller company. We’d like to do things right. We’d like to stay in the game for, say, a year or so, maybe 2 years, you know, on the OTC, which is the over the counter and then up list. So, hey, when you up list, you’re going to NASDAQ.
You’re raising bigger money and if you have a really good product you know, sometimes you need a place to start and this is a good place to start. I mean, when you’re a micro cap company, you can even start by not having audited financials, just getting your financials done, call them on audited.
People can see them. Then you can move up to corporate governance. And getting yourself audited it’s a slower pace where you can start but the bottom line is You’re really going to focus on uplisting eventually even some of the trends in trading An otc company that’s not audited very difficult a lot of the broker dealers If it’s under a penny, they’re not even going to let you take the stock, but it is a good place to park yourself.
Get some notoriety eventually start filing audits doing your 3 reviews. And then getting really the right accounting firm and bankers and lawyers to take it to the next level. But they’re thinking these CEOs, they have to get started. They may not have the infrastructure to go immediately to a bigger board, but it is a good way to start.
1 of my 1st companies, we took it from a bankruptcy, probably in 2006. And I was fortunate. I rang the bell. We got to the New York Stock Exchange. Amazing. I got to tell you, it was, it was strange. I told everybody else will be on television and, you know, with the, with the independence rules these days, they probably allowed it back then.
But, you know, I was on TV, people were calling me, they’re like, Neil, we saw you. And I’m like, yes, my company meaning one of our companies. And I don’t know if you’ve ever been to the New York Stock Exchange where they make you, you’re sitting in a room that’s laden in gold, gold tables. And it was really I guess it’s something a lot of people don’t get to witness.
I mean, when you go, when you go public and you’re on the NASDAQ, it’s all computerized. So you’re behind a screen and all the computers are doing everything. But with the New York Stock Exchange, there’s people running around. There was a lot of excitement and I’ll never forget that. Yeah. Wow. Is there I’ve been having this discussion kind of often since I’ve been going down, you know, and covering this story and covering the conferences, you know, the concept of some of these you know, newer entrepreneurs, or I shouldn’t say newer entrepreneurs, but individuals making the decision of whether to take, you know, private equity, whether they go public, whether if they want to, you know, that other responsibility obviously, You know, there’s a lot of factors here.
So this is not a loaded question by far. Not meant to be, but have you noticed, like, from your, you know, from your vantage point, like any thoughts on that, like whether, you know, or things like that are thinking because of the regulatory environment specifically. And that’s where that question comes from, by the way, is it even worth it?
Or should they could raise money? Otherwise should they go, you know, another route, like any thoughts on that? Very difficult to raise money as a private company, as, you know, the investment right now is 2024 for context for everybody. That’s listening to this in the future, especially right now. January 2024.
Yeah, there’s, you know, if you go public, you’re using other people’s money. Maybe you can get more money. It’s all about the infrastructure because these micro cap companies, you know, they may have an idea. There may be 3 people. There may be 20 people. You know, private equity really would not be something that they would do in their infancy, but they could do.
I’ve seen a few of these private companies to raise money. They’ve been doing eSOPs lately, which is where the employees. Sign the company goes to a bank, the bank funds them and they sell to the employees, but even that has been very slow. So what I’ve seen going into 2024, I’ve seen lot more activity.
These micro cap companies, they’re doing reverse mergers. Again, they’re looking for SPACs, which are companies that already have money and they need a company with a great idea immediately before they’re term expires. Mm-Hmm, . But basically if I had my own company. And I needed to grow it.
Why not use other people’s money? If you really believe in it and this way, the investors, they have a way out right? You give a guy stock. He says, Levine. I don’t like this idea after 2 years and he can sell his stock. It can get out. I’m talking investors. Yeah. Yeah. You know, if you’re a private company, you know, the 1st thing they’re always asked is if I put money in, how do I get out?
And when can I get out? Just in case you need to get out? So that has been a long time discussion when you go public as a small company. And it’s still the same question. It’s like, why should I put money in your company? You know, it’s just a 5 year play. Is this a 2 year play? Are you going to be able to build your infrastructure to be acquired?
You know, and that’s where a P. could come in. You know, once there’s really good establishment, because he’s looking for. You know, quite an EBITDA, maybe five million dollars or up. So, last question here, Neil you’ve mentioned this multiple times, and I’d like to maybe get your, your input a little, you’d elaborate a little bit further here.
Like, the importance of the team that these, CEOs are surrounding themselves with, whether it’s their accountant, their lawyer, like, all of these other components that you’re mentioning, like, talk to me about the team. Yes, so important, because with quality control and corporate governance, you’re going to want the right accounting firm.
You’re going to want to pay the right accounting firm with the regulatory environment. You’ll see many, many. Firms really being barred for 5 years, 3 years, it’s really, it’s really tough. So, but when you’re a bigger firm, you know, you, do have the quality, you have the work papers, you have everything.
You know, that protect the investment community, and you need a good lawyer. You need a lawyer, you know, who’s not just going to say, hey, I’ll do your form 10 or form 10 Q. you know, you’re going to need a lawyer who knows the rules and you’re going to need a banker who understands. You know what warrants and issuing options due to a company’s balance sheet and if there’s going to be a lot of dilution So you’re really the ceo really needs a quality team Around them to execute his business plan really in this day and age You know when I came around doing this in early 2000s Less important now extremely important Neil, if somebody’s listening to this and they want to continue the conversation and learn more about Markham what’s the best way for them to do that?
Sure, well, you know, Markham has their website Neil. Levine. At mark, I’m lp. I’m also. Very popular on LinkedIn, so there’s a lot of ways you can find me if you want to ask to the people running the conferences that I speak at 2 or 3 times a year. They know how to get me as well. Be my pleasure to answer any questions.
Anybody has fantastic. Well, no, thank you for coming on the show and I look forward to meeting you in person at the conference and To the audience as always thank you for tuning in if you didn’t hit that subscribe button yet and you’re a new listener Hey, don’t forget hit that subscribe button.
We have many more mission based individuals on the line that we don’t want you to miss a thing here. So again, hit that subscribe and Neil really has been a pleasure. Look forward to seeing you in Atlantic city. So thanks again. Thanks so much, Adam. And I will bring a winter coat for you.