SEC Rules for Raising Money Through Syndication

[Account Closed]

Hey BP,

I was recently listening to the awesome interview that's in the BP blog that @Douglas Dowell did with securities attorney and syndicator Gene Trowbridge. It was full of some great information but it really raised a big question for me.

I have always heard the phrase, "If you find a great deal the money will find you." (If you look for it of course)

After listening to Gene though, he made that whole idea sound completely illegal when operating through a syndication. He was talking about how when you make your first contact with a potential investor, you really aren't supposed to even mention a deal you are working on or give them any idea of a future project you will be doing. Or even have a deal in your mind that they can invest with you on.

He also said that there is supposed to be a cooling off period (although he admitted there isn't a specific number of days or time) that the SEC doesn't want you to present a deal to a new investor.

After hearing this, it really dismissed the idea of money finding you if you have a great deal.

I'm confused about it though because there are still some syndicators out there who push the idea of "the money will come to you if it's a good enough deal."

Which school of thought is correct here?

Gene really made it sound like you have to absolutely without a shadow of a doubt have all of your investors vetted and lined up way before you even consider a deal.

Do you guys have any thoughts??? @Brian Burke @Bryan Hancock @Jeff Greenberg @Sepehr B. @Eric Tait @Dave Van Horn

(I hope you guys don't mind me tagging you :) )

[Douglas Dowell]

@Karen Margrave I was referring to the options you have when you offer a security. Your first option is to get it registered. That is VERY expensive but you can advertise to the general public=general solicitation.

The second brand new option is Reg D 506 C. Unlimited ACCREDITED investors and you may advertise but you may not have sophisticated investors in your deal. The other interesting change is you have to do more diligence to show you made sure they were accredited.

The third option is 506 B. (The way its been done for along time). You may not advertise but your allowed accredited AND sophisticated investors.

The fourth option is the intrastate exemption. If the property, sponsor and investors are all in the same state....then the state securities law will govern whether you may advertise or not.