I was told by someone that for a J.V deal that I can only present an off-market deal to something like 10-15 individuals only because of SEC regulations. I would be one of the partners. Does anyone know more about this or what the best way (besides organic networking) to approach only a small select few for a partnership deal?
You can have up to 35 sophisticated investors, no limit on accredited investors. However, the investors are supposed to know you personally, and they should solicit you, not the other way around. That's my $.02 from a non-lawyer who has invested in a few private placements. I'd advise retaining an attorney who's skill in drafting private placement memorandums, operating agreements, and subscription agreements.
I'd just talk to people who are propsective investors about what you're working on. If it sounds interesting and they have confidence in you as a lead, they'll ask for more info.
Much appreciated! You think it would be safe to advertise myself only (as looking for partners) instead of going into the details of the actual property?
I'm not an attorney, and don't feel comfortable advising you on that one. Good legal counsel is highly advised if you're going to enter any kind of partnership.
I am no lawyer either, BUT the only time you have to be concerned about SEC rules is when you are doing a syndication (ie pooling the money of PASSIVE investors). The key word is "passive investors". Inthis case, you are essentially selling a "security", and therefore must followSEC Reg D rules. On the other hand, if you are simply looking to JV with other "active" investors (ie investors that are involved in the management and/or work involved in the project, you don't need to be concerned about the SEC.
Back to syndication.....If you are truly looking to syndicate a deal (with passive investors) then I suggest you go to the following website which will give you great insight on the process: http://www.syndicationlawyers.com. You will need to understand the 2 types of syndication that you can now do, since there are differences in how you can advertise or not for passive investors (accredited or sophisticated). Good luck!
The SEC and state agencies care less about the words you're using and more about what you're doing. If you're taking people from multiple people, putting it together and using it to do deal, you're doing a syndication. Doesn't matter if you call them partners, it a JV or something else. You ARE selling securities.
Advertising is possible now, under the JOBS act. But only under limited circumstances. And ALL investors must be accredited and you must take steps to verify they are accredited. The last stuff I saw discussion this verification made it sound like it somewhat fuzzy what you should do to do the verification, but that was months ago. Perhaps that's been sorted out now. The definition of "accredited" is well defined. "Sophisticated" is fuzzier.
If you want to get money from non accredited investors, "organic networking" is your only option.
Thanks everyone for the responses. I am sure my broker knows the ins and outs and the company has allways been referral based on passive investments which makes sense but is hard for someone like me starting out (especially since most all my friends don't have cash to invest at the moment anyways) to retain a new client base this way...
I guess I will start research the qualifications of accredited investors and see if advertising would even be possible.
Verifying investors if you publicly solicit is fairly straightforward now, but is a PITA for investors. You'll need an offering circular if you plan to advertise your deal. Talking generally about what you do is probably not advertising in most circumstances and giving investors active control tends more toward the "partnership" instead of "selling them securities."
To be safe I'd recommend just doing an offering circular and preparing yourself properly. An ounce of planning is worth a ton of cure in this space. The securities attorney is well worth the investment.
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