Accredited Investor Rules Question

[Brian P Carolan]

Hi Everyone,

I am looking to invest in a syndication deal that is offering units in an LLC under Reg D 506(c) which is only open to accredited investors that are verified.

I am not currently an accredited investor and I was wondering if it would be possible to get around these rules by using the following strategy below:

1. My father (who is an accredited investor) would form an single member LLC and use it to purchase the units in the syndication that I want to invest in.

2. After his single member LLC closes on the deal and owns the units in the syndication he would then sell me 25% of his single member LLC that just closed on the syndication deal. This would leave him with 75% ownership and me with 25% ownership in the LLC that now owns and interest in the syndication restricted to accredited investors that I wanted to purchase but would not be able to since I could not be verified on my own.

I believe if my Dad and I formed the LLC together to start we would not be able to purchase the units in the syndication as 506(c) requires verification of all members in the LLC at the time of purchase.

My first thought is that this strategy wouldn't technically be allowed under the law because it is basically the same thing as the example right above but how would anyone ever really find out if my dad later sold me shares in his LLC? Does anyone know the legal risk of us doing this?

Or would there be a way around this if my dad purchased the deal as described above but then Filed Form D under 506(b) for his LLC which would allow up to 35 non accredited investors to invest in his LLC. After he files Form D under 506(b) for his LLC that now owns the syndication he would then sell me 25% of the units in his LLC using the exemption for 35 non accredited investors under 506(b). Has anyone ever tried this strategy or know if it would be allowed?

Does anyone have any ideas that would allow my Dad (accredited) and me (not accredited) to invest in a real estate syndication that is only open to accredited investors?  

I just think it is such B.S. that the government is telling me I am not allowed to invest in a deal like this when I have the necessary financial knowledge and understand the risks involved.  If anyone knows a legal way around these rules I would greatly appreciate it.

Thanks,

Brian