Are investment clubs required to file with SEC?

2 Replies

I have been extended an opportunity to join an investment group. The questions that I have concern the legality of investment groups, filing with the SEC. They are asking for an annual membership fee, plus an initial deposit of $10000.00 to join.  The recruiter says that I will have total control over my deposit and decisions on which projects the group has, that I wish to invest in. They are not offering any guarantees on the returns of each project. Just that it will given me some opportunities to earn more money.

The way the person makes it sound, as if they buy land and build, then sell for profits. That they are using the members funds to finance the builds. Then they dispersed the profits in equal shares to all who invested in that project. Is this legal without filing with the SEC?

Could this just be a private crowd funding group?

I can not say I have heard of many of these being properly structured and operated above board.  Most that I have known of have gone down in flames at the expense of the "members".  

The general rule is ANY security is required to either be registered or exempt from registration.  The exempt status requires a Regulation D filing.  

The fact that there is a "membership" status to it or they might claim they are "private" does not absolve them of the above.  

Unfortunately the other groups like you described that I know of ended with the owners in jail.  I am not a fan of any of them.

Thank you for the the input. Most of what I have seen have been run like Ponzi schemes and the person doing the recruiting wouldn't answer some of the questions I had. It raised several red flags.

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