Securities Laws - What am I allowed to say on the internet?

Question

Hi BPers,

Over the past year I have been working with a social media coach who has got me creating a lot of content on my website, and through youtube, twitter and facebook. My intention is to help educate other investors and also to attract private lenders or JV partners. I am a bit concerned as to what I can and cannot say in the public domain. I don't want to get on the bad side of the securities watchdogs, but I do want to grow my business and create win-wins for other investors.

Am I able to say things similar to the following?..... "I am looking for partners who want to get involved in projects such as this"

Any input on this would be appreciated.

Brian Burke · Answer

The advice to get legal advice is good advice.  LOL

You can write whatever you want but you'd better have it scrubbed by counsel prior to posting it. To contain your legal fees you can make your attorney's job easier by avoiding talking about any specific open offering, promises for rates of return, and any solicitation for funds.

There is a new body of rules coming into focus that allows general solicitation of private offerings but if you want to go there you'll need specific legal advice before you even begin the offering documents.

Your best bet is to make postings about previous deals, past performance, your skills, and your track record. That's what attracts investors anyway. No one calls you to invest because you post that you are looking for investors for XYZ deal. They call because you are able to articulate that you know what you are doing and that you've made other investors money.

Account Closed · Answer

Before you review Rule 506 to find out about exemptions from securities registration you should start with the original securities act (1933). Securities and an "investment contract" is defined therein. Also, the SEC uses the "Howey test" to determine if your offering is a bonified security requiring registration (see SEC v. W.J. Howey Co).

Account Closed · Answer

By the way, are you targeting investors in the US or Canada?

If you are planning to issue securities, the SEC is usually somewhat extremely emotional about the issuer ascertaining that the offer is only to accredited or sophisticated investors.

Although some securities may be exempt from registration, open solicitation however typically requires the issuer to both register the security with the SEC and also comply with whatever specific stipulations that they deem necessary in order to solicit openly.

Cal Ewing · Answer

Okay thank for your help @James Miller. And again thank you for the excellent feedback everyone.

Jake Harris · Answer

This is a very complicated subject. It depends on what advise or education you are giving. Of course unless you are legal counsel and retained you can't offer legal advice. But as far as educational of what is normal and disclose often that you are not a lawyer and that people should do their own due diligence.

If you are offering say terms to a loan or deals then it starts to get much more fuzzy. You can run into mortgage broker license issues, securities issues such as 506c (which allows you to solicited to the general public but puts the burden of proof of accredited investors onto you or a 3rd party. )

So I guess it just depends on what you are doing in forms of education. Like look at bigger pockets here, they do podcast, forums and such without any violations as they aren't selling any securities or trying to pimp some loan, Even wholesalers and people looking for JVs are fine. Just depends on what advice and if you are selling any securities.

Cheers,

Jake

Cal Ewing · Answer

Thanks @James Miller. Luckily Texas is my main area of focus. I am guessing this too will depend on the state but what about saying that I am looking for private lenders with no mention of interest rates or any kind of expected returns etc.?

James Miller · Answer

Securities lawyer here:

You need to go hire a lawyer in your jurisdiction. If you follow anyone's advice on the forum, you're playing with fire. Securities violations are frequently CRIMINAL violations. Hell, the Texas Attorney General was just arrested for securities violations.

Typically, you can't advertise AT ALL, absent registration of the securities ($$$$$$) or some applicable exemption from registration. Rule 506 of Reg D added some limited advertising, and there are other certain ways to not publicly solicit investors, but they are very detailed, complicated, and must be 100% strictly followed. Also, EVERY SINGLE STATE has its own state securities laws that must be complied with. So unless you're soliciting investors in a single state, you may need legal counsel in each state.

So, you really shouldn't advertise for investors AT ALL, until you run the EXACT language for the deal by a securities lawyer first and get the A OK.

Bill Gulley · Answer

The best way not to drown is not to get in over your head! Research, learn and do, in that order. :)

Cal Ewing · Answer

Thanks so much for all of the feedback everyone. It is greatly appreciated. I have been planning on consulting with an attorney on this issue. I did however want to get some opinions, thoughts and advice ahead of time from the BP community.

@Brian Burke I think you make a really great point in regards to posting what I have done in the past, my skills and track record as that is automatically implied to viewers that it can be done in future deals.

@Bill Gulley thank you for your detailed response. I may have to take a close look at how have said things thus far and make some changes.

This thread has given me some food for thought and resources to read up on.

Thanks again everyone.

Securities Laws - What am I allowed to say on the internet?

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