Syndication Law & The Private Placement Memorandum Attorney

A syndicator or fund manager has three main fiduciary duties towards their investors - duty of care, duty of disclosure, and duty of loyalty. The duty of care requires them to make reasonable decisions and safeguard the investors' money. They are not allowed to be negligent or reckless with the funds. The duty of disclosure, on the other hand, demands transparency from the manager. The investors s...

Social media in the context of Regulation D, Rule 506b and 506c, as they relate to finding investors, can be daunting. The key point is the concept of 'general solicitation' - the process of making a public offer or advertisement to potential investors. General solicitation is allowed under Rule 506c but is limited under Rule 506b, which prohibits certain marketing activities, such as holding semi...

The discussion revolves around the integral team members required when creating a real estate syndication. These team members collectively play a critical role in ensuring the success of a syndication. Real Estate Syndication Attorney: This professional ensures compliance with the Securities and Exchange Commission (SEC) regulations and state laws during the offering of the syndication, which is a...

The topic discussed revolves around the distribution of returns, known as 'waterfalls,' in real estate syndication. The speaker used an example to explain the distribution process: a $5 million property bought entirely with investor funds that yields annual rents of $550,000. In this scenario, the investors are promised a 7% preferred return, also known as a 'pref,' amounting to $350,000 annually....

The topic discussed revolves around understanding the myriad of exemptions available for registration under the U.S. Securities and Exchange Commission (SEC) rules, often referred to as an "alphabet soup" due to their alphanumeric identifiers. This topic is introduced from a real estate attorney's perspective, who faced the task of navigating through these exemptions while putting together a syndi...

The various regulations and exemptions from SEC registration that are involved in syndication and fundraising processes. A walkthrough of the 'alphabet soup' of syndication, unpacking the regulations from A to D, specifically Regulations A, CF, and D. Regulation A is split into two tiers: tier one allows raising up to $20 million, accepting non-accredited investors and requires regular disclosures...

The discussion centers on the various types of business entities, specifically focusing on the most appropriate ones for syndications. Among the options detailed are sole proprietorships, partnerships (including general, limited, and limited liability partnerships), Limited Liability Companies (LLCs), and corporations (including S corps and C corps). Sole proprietorship is mentioned as a choice fo...

The discussion is centered around the feasibility of obtaining a traditional bank loan while concurrently raising equity from investors for a syndication or fund, particularly in real estate. The answer is affirmative, but there are key considerations that require careful management. Firstly, potential investors need to be aware that the bank, as the primary lender, is paid back before equity inve...

Syndicators engaging in fund creation or syndication do not require a real estate or securities license. While securities licensing poses challenges, selling securities does not necessitate a license. Regulation D allows sponsors to sell securities without involving a broker dealer. However, possessing a securities license entails ensuring suitability for individual investors, which can be problem...

Non-US individuals can invest in syndications or fund offerings. In today's globalized world, we have investors from various regions around the globe seeking opportunities to grow their wealth. Thankfully, the United States allows foreign investors to participate in syndications and offerings through a rule called Regulation S. Regulation S is similar to Regulation D, which governs US investors, w...

A self-directed individual retirement account (IRA) is a fantastic opportunity for syndicators and fund sponsors. It functions similarly to a traditional IRA, with an institution holding the funds and ensuring tax protection by preventing investors from accessing the money prematurely. However, a self-directed IRA goes a step further by allowing the investor to make investment decisions and choose...

In the syndication world, you often come across the terms GP (general partner) and LP (limited partner). These terms originated from the structure of limited partnerships (LPs), which are still used in specific cases. However, most syndicators and private offerings have transitioned to using limited liability companies (LLCs) for their projects and assets. This shift was driven by investor sentime...

As a sponsor of a syndication or fund, it is essential to consider the consequences if the investment does not generate profits or incurs significant losses. While it's a worst-case scenario, it is possible that despite raising funds and gaining the trust of investors, the business or real estate deal may not perform as expected. Investments carry inherent risks, and it's crucial to convey these r...

When it comes to raising capital for your business, using Regulation D is not only possible but also the main purpose behind its creation. While many associate Regulation D with real estate syndication, its primary function is to provide smaller companies with a capital influx without the need for SEC registration. There are various reasons to raise capital for your business, such as acquiring ano...

Tilden Moschetti, a securities attorney, discusses Rule 506d, a part of Regulation D, which defines "bad actors" in the context of securities offerings. These "bad actors" are individuals who are prohibited from participating in the offering of securities due to past misdeeds. Rule 506d is applicable to both Rule 506b and 506c offerings. According to Moschetti, the rule disqualifies a wide range o...

Tilden Moschetti, a securities attorney with Moschetti Syndication Law Group, specializes in assisting syndicators and funds in setting up offerings for Regulation D Rule 506b and 506c offerings. He addresses a common myth among people that they can conduct a securities offering without filing with the SEC if they just involve friends and family, or if the investment amount is below a certain limi...

Tilden Moschetti, from the Moschetti Syndication Law Group, provides a detailed walkthrough of Form D filing with the SEC, which is crucial for a Reg D offering. Form D is four pages long plus instructions and is filed on the SEC's EDGAR database. He explains various aspects of the form, starting with the issuer's identity which details the entity filing the security with the SEC, their jurisdicti...

Tilden Moschetti, a securities attorney at Moschetti Syndication Law Group, discusses the complexities of allowing an LLC to invest in a syndication. According to Moschetti, this is a common query from clients, and the answer largely depends on whether the investment comes under Rule 506b or 506c offerings. For Rule 506c, an LLC can invest if its assets exceed $5 million, or if each member is an a...

Tilden Moschetti, an attorney with Moschetti Syndication Law Group, discusses a common misconception about a potential loophole in securities regulations. Some individuals believe that borrowing money from friends and family in the form of a loan for a syndication does not constitute a security, thus bypassing the regulations. Moschetti explains this is not the case, citing Reeves v. Ernst and You...

Tilden Moschetti, a securities attorney with the Moschetti Syndication Law Group, presents an in-depth analysis of Regulation D Rule 506c. Moschetti emphasizes the value of direct reference to the regulation itself for clarity, drawing on advice from his law school professor. He cites Rule 506c in the context of its placement within Book 17 of the Code of Federal Regulations, emphasizing that it c...

Our ‘Ask Me Anything’ Q & A webinar in August 2022 was a big hit and we kept it unlisted for a while.  Since some of the questions had that red-hot quality to them - aka, every syndicator had asked themselves that question and more than once…  Questions like… ‘How do I handle timing differences for different investors in a given fund when calculating returns?’ Or… ‘Can I get my friends to inve...

In the great movie Moneyball, Billy, played by Brad Pitt, says he wants to bring back an aging ballplayer by the name of David Justice. Everybody thinks it is a terrible idea to bring him back. He can’t hit home runs anymore. They ask Billy why he wants Justice back. Billy points to Pete, played by Jonah Hill. And Pete says, “because he gets on base.”  Visit the web version here: https://www.mosch...

You’ve done it! You’ve re-entered, you’re back on Earth. You’ve completed this and it’s all done! We started on the launch pad, putting our structure in place, getting our founder investment theory done, and learning about underwriting. Visit the web version here: https://www.moschettilaw.com/launching-real-estate-syndications-conclusion-putting-it-together/ Welcome to Launching Real Estate Syndic...

Now, you’re outside of the capsule after re-entering. Your investors have gotten money. All is good with the world. Is it time to party? Sure, it’s time to celebrate… but you’ve got to get to the party first! And to do that, you need to go through a closing, just to make sure that every single thing is wrapped up neatly, so that when you go into your next syndication, you don’t need to worry about...

You’ve basically re-entered the atmosphere and you’re on the surface of the earth. Now you just need to emerge from the capsule. And that means making those final distributions to your investors. There are several processes to do this... Visit the web version here: https://www.moschettilaw.com/launching-real-estate-syndications-final-distributions-to-your-investors/ Welcome to Launching Real Estat...