FINRA Regulations and Private Equity

[Brandon Roberts]

Alright everyone my business may have just hit a huge roadblock...

I recently started a new job where I need acquire my series 7 and series 24 investment licenses. I won't be using these to sell, just to audit other brokers. Last week it was brought to my attention that if I want to continue to invest in real estate I will have to do so through conventional mortgages only. Private equity backed by a promissory note is considered a “bond” which is considered a "security outside of my broker/dealer's control” which is a big no-no if I am registered with them. Does anyone know if this is true or not? I am thinking I can just not have the equity backed by an official note (the people who would be investing with me are a close friend and my family so they trust me) and that would be okay, but I am not sure how un-documenting this large sum of cash would mess with FINRA’s regulations... Or the investor could buy the property, refinance it and hold the note with the bank while transferring ownership over to me? That being said, I am also being warned to stay completely away from being involved in the transaction because any association with my own personal real estate (bought outside of conventional mortgages) is in violation of FINRA's rules. Has anyone run into this before or know anyone who has their licenses and still invests in real estate without using conventional mortgages?

Thanks in advance for your help!