All Forum Posts by: Jillian Sidoti

Jeff I would suggest getting yourself an investor qualification form to establish a preexisting relationship with any investors. This accomplishes multiple things: provides protection for you in case there is an issue in the future and also establishes you as a professional that respects the rules. Investors respect that. It also says "I am not looking for just any investor, I am looking for the right investor." This includes friends and family. 

Our internal firm policy (this is not a law, just our rule) that anytime you are dealing with unaccredited investors, more than 5 investors, or raising more than $500,000 we insist you use a PPM. It provides the most protection. 

Most of my clients create a "property package" containing pertinent info on the property: area, unit mix, pictures, vacancy, etc. If you email me, I can send you some samples that you can use as a template. 

Our firm represents many of Brad's students. I think Brad is fantastic. He really trains his students to know what to do and provides a lot of hand holding. 

Let me speak to the Canada vs. US thing. If I have a client that is raising money from Canadians, I usually write the deal as both a 506 and mention Regulation S. Depending on how the Canadian investors are procured, usually Canadian securities laws specifically are disregarded because if you review NAASA, there is cooperation between the US and Canada. 

More importantly is how you structure the deal from a tax perspective. The US has a tax treaty with Canada regarding LPs but not with LLCs. So anytime you are dealing with Canadian investors, you should definitely use an LP as your investment vehicle and not an LLC.

It is not a registration. You have to file a form D. Also, you do not need a securities lawyer in your state. You need to have a competent securities attorney, period. If you needed a securities attorney in every state where you had investors, you would go poor. 

This is the bottom line: you have to provide adequate disclosure to your investors no matter where you or they live. In MOST circumstances, you must file a form d in the state where your investors are located. 

@Mark Gallagher - you are in luck. NJ has a great self-executing exemption. 

Offers to No More Than Ten Purchasers
N.J.S.A. 49:3-50(b)(9) provides an exemption for sales to no more than ten New Jersey residents in any twelve-month period, provided that the investors purchase for investment, no commission is paid directly or indirectly for soliciting buyers in New Jersey, and the securities are not offered or sold by general solicitation or general advertisement. This is a self-executing exemption: no fees, forms, or other documents need be filed with the Bureau. 

What they are, I promise. I can also post ones from the state of New Jersey. Since you are in the state of New Jersey those would probably be the most helpful. I just didn't have time this morning  to search for all of them I did this before my kids got up to go to school.

Also - @Mark Gallagher - see my comment on self-executing exemptions. If your father is in a state where there is a self-executing exemption, you should be good.

@Mark Gallagher - technically, yes. However, I am also a person of reason and the reality of the state ever finding out about it is slim to none, so I say carry on. 

Also, @Jessica Zolotorofe - this is not a registration. You used the word "registration" and I just want to clear that up. It is an exemption. Regulation D is an exemption. However, you need to provide notice (Form D) of use of the exemption. I hope this helps. 

@Jessica Zolotorofe - you know the law, but there are some nuances missing. 

THe 35 rule refers ONLY to the federal law and the amount of sophisticated investors allowed in a Rule 506(b) this does not preclude you from a.) proper disclosure b.) filing a form D. 

Some states (not federal) have a "self-executing" exemption if you secure a note with a deed or mortgage which means you need to do nothing except provide the note. This is states like Colorado. However, states like Washington have made it a duty to comb through title records to find non-traditional borrowers and lenders and then nail the borrower with a securities violation. I am not kidding. I had a client that had to pay a $5,000 fine for borrowing money from his brother in law and not filing a form D in the state of Washington. 

http://www.securities.arkansas.gov/!userfiles/CSA%...).pdf

http://www.securities.arkansas.gov/!userfiles/Spyd...

http://www.securities.arkansas.gov/!userfiles/Clea...

Here are the rules for Arkansas: http://www.sos.arkansas.gov/rulesRegs/Arkansas%20R...

Here is an interesting question on QUORA: https://www.quora.com/What-does-one-do-if-one-forg...

Now, keep in mind, this has NOTHING to do with disclosure and JUST has to do with the filing of the FORM D. The failure to provide proper disclosure is a whole other problem that I could wax poetic about all day long. PROCEED WITH CAUTION. Please feel free to ask me as many questions as you would like. I am happy to help as much as I can.