Know which offerings and exemptions fit your business goals and long-term strategy

Regulation D Offerings and Exemptions

Regulation D allows businesses to raise capital through public advertising for their offering. Usually, a private company would have to go through the SEC’s registration process and be limited to only accredited investors. These baseline funding requirements are complex enough to involve securities laws and regulations, but there are three exemptions under Regulation D from which you must choose. This is where an experienced real estate attorney comes in.

The team at Moschetti Law Group has extensive experience in securities laws and the intricacies of Regulation D exemptions, and we will gladly review and advise you on your offerings, exemption selection, and fundraising strategy.

Exemptions under Regulation D:

Rule 504

This exemption allows your business to sell securities for a total value of up to $1 million to accredited investors only. The securities are restricted, and you must comply with Blue Sky Laws that require you to report financial details of your offerings and sellers and the investors involved in the transactions.

Rule 505

This exemption allows your business to sell restricted securities up to $5 million in total value. However, you are limited in how you advertise your offering and how many non-accredited investors may purchase securities.

Rule 506

In 2013, after the JOBS Act, Rule 506 expanded from one exemption to two. This new exemption allows private companies to “generally solicit” (advertise) as long as they only accept accredited investors’ investments in the end. This has become a very popular exemption because Blue Sky Laws do not restrict businesses under this exemption. The following are the two subsections of Rule 506 of Regulation D:

  • Rule 506(b)
    • No public advertisement or “general solicitation.”
    • 35 non-accredited investor limit.
    • Investors must receive a private placement memorandum.
  • Rule 506(c)
    • Accredited investors only.
    • Public advertisement of offering permitted.

Our team of real estate attorneys has experience selecting the right Regulation D exemption for each unique real estate and business situation. We can help you build a strategy toward your goals that meets all SEC and regulatory requirements while keeping your interests and assets at the forefront. Contact Moschetti Law Group today to set up a no-obligation strategy session and find the offering exemption right for your business.

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Accredited Investors

As you saw above, the difference between accredited and non-accredited investors has a significant bearing on the type of securities you will choose to offer and the exemption you will be able to take under Regulation D.

Rule 501 of Regulation D details the difference between these investors. In short, it explains that accredited investors like banks, businesses, insurance companies, etc. must have $5 million in assets or more, and individual investors must earn at least $200,000 annually, or $300,000 if they are a married couple or have a net worth over $1 million.

Any investor that does not meet the above criteria is considered non-accredited, according to the SEC.

Regulation D requires that the majority of your investors be accredited. Depending on the Rule under which your offerings fall, you must comply with the limit on the number of non-accredited investors you allow to purchase your securities. An attorney experienced in real estate and securities law can help you find the most appropriate exemption for your business and build a strategy for effective fundraising.

A healthy marketing plan and a thorough procedure for selling your securities will ensure your real estate venture’s smooth undertaking. This involves the process to qualify investors and solicit, or advertise, effectively under applicable securities regulations, and marketing to and informing your investors regarding the offering. The attorneys at Moschetti Law Group are well-versed in Regulation D’s rules and how to leverage the appropriate exemption for your business. Contact us today for a free, no-obligation strategy session.

Form D

No matter the type or number of investors, your business must disclose specific information on the offering by completing Form D. This form must be completed and submitted within 15 days of your first sale. Hence, it’s imperative to know what elements need to be included and how to submit your paper or electronic copy to the SEC.

Your real estate attorney can help you with any questions you might have and review the information in your Form D that will include disclosure of all stakeholders in your company, the involvement or not of a broker, and details regarding your offering.

Make informed decisions about your real estate transaction or syndication.

Contact our Calabasas, CA real estate and business attorneys today!

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Disclosures

The disclosures to be provided under Blue Sky Laws and to any investor that asks for them include:

  • Details of the offering
  • Past convictions or legal actions that might affect an investor’s decision
  • Notices of sale
  • Details of who will benefit financially from the offering
  • Other required disclosures and documents specific to the state of California

Disclosures protect the investors in real estate transactions, and filling out your disclosure forms wholly and honestly, protects you as the seller. Having a thorough review by an attorney who specializes in real estate and securities laws protects you both. The real estate lawyers at Moschetti Law Group can review your documents to ensure that you have provided all necessary disclosures and are protected under the law and compliant with anti-fraud and liability laws. Contact our team to discuss a disclosure review today.

Private Placement Memorandum

Rule 506 requires that you provide a Private Placement Memorandum to non-accredited investors. In it, you will detail your company’s financial information and risk analysis of the investment offered. This is a legal document that must be drafted with care and precision to avoid misrepresentations or omissions that could spell trouble with the SEC and state regulatory agencies. The attorneys at Moschetti Law Group can help you draft a complete and compliant Private Placement Memorandum that will protect you and your interests.

Intrastate Offerings

In intrastate crowdfunding, businesses raise capital by selling securities only within their state. This exemption may be of interest to your business because it does not restrict the offering’s size or the number of investors who may take part. As the offering company, you must do the majority of your business in the state in which you are selling securities, and all investors must provide a statement to attest that they live in the same state and that they will not sell their offering outside the state for at least nine months.

Intrastate offerings can be an excellent opportunity for crowdfunding, and they also require careful oversight to maintain compliance and ensure all investors qualify with the requirements. Call the real estate attorneys at Moschetti Law Group today and see how we can help you build a comprehensive intrastate offerings strategy.

Common California Intrastate Offerings:

  • 25102(f) Exemption – limited offering with investors with pre-existing relationships with the seller and no more than 35 unaccredited investors
  • 25102(n) Exemption – in California and 30 other states that adopted the Model Accredited Investor Act, this exemption can be taken if your offering is $5 million or under and all investors are accredited
  • Qualification by permit
  • Regulation D Rule 506 – public advertisement allowance
  • Regulation D Rule 504 – Small Corporate Offerings Registration (SCOR) for raising capital or succession planning allows brokers to trade securities directly

These intrastate offerings involve thorough and careful disclosures to the investors in a Form D or Private Placement Memorandum. This is an essential step in the success of your company’s offering and the relationship with investors and safeguarding yourself through compliance with state securities laws.

Each exemption has specific allowances for advertising or communicating the investment opportunity to potential investors. A qualified real estate attorney can help you determine which intrastate offering and, subsequently, what marketing strategies are best for your company. Contact Moschetti Law Group for a no-obligation strategy session for your offerings and exemptions today.

Get Funded with Help From Our Real Estate Crowdfunding Attorneys

Crowdfunding is one of the most popular new ways to fund your real estate project, and a Regulation D Exemption may be right to help you maximize your funding potential. Ensure your marketing and financial strategy’s success with help from one of Moschetti Law Group’s qualified Real Estate Crowdfunding Attorneys. We have helped small businesses, large syndication companies, and even our associates meet their fundraising goals with Regulation D offerings under various applicable rules.

See how the Moschetti Law Group can help your company reach your fundraising goals by setting up a free, no-obligation strategy session to discuss your syndication and financial strategy now.

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