Marketing under Reg D 506(b)

[John Stanczak]

Hello all, 

New to BP and just getting started with a RE Syndicate. Have a question about legal requirements to market ourselves as an investment opportunity.

We have our eyes on a local 16-unit, and want to start looking at raising capital. We started a FB page for our LLC that essentially advertises the syndication construct, and encourages people to reach out to me to discuss becoming a capital partner. The idea would be to get on the phone, talk them through our business model, then detail any specific property offering we might be raising capital on. After that, we'd work out an OA.

I just got off the phone with a syndication attorney and he suggested I need a securities license to advertise like that. I'm not trying to limit to accredited investors, so I looked at two things from 506(b): 1) Issuer must have a substantive, pre-existing relationship with investors; 2) General solicitation or advertising of the securities is prohibited. 

Some questions here: Are Facebook "friends" substantive relationships (from a legal perspective)?  If I'm only advertising the model (not a specific property), is that still a security? How have others handled the advertising piece to bring on non-accredited investors?

Thanks for the help!

[Jillian Sidoti]

I practiced securities law for almost 15 years and prior to that syndicated my own deals. I am now back to doing deals and helping people figure out how to raise money for their deals. 

To this end, I don't know who you spoke to or if there might be a misinterpretation but you do not need a securities license to market your own deals or your own company. There is an exemption under 3(a)(4)(1) of the securities exchange act of 1934. Also, under 506(b), focus on marketing your COMPANY not your OFFERING. This will make all the difference. 

A substantive pre-existing relationship is "intimate knowledge of one's financial ability to invest." This is not FB friends at all. You can achieve this relationship with an investor qualification form.