SEC registration and exemptions

Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes

1y

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

2 Reply

Anthony Klemm

OP

New to Real Estate · Las Vegas, NV · Member since 2025 · 14 posts · 10 votes

1y

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

1 Reply

Dominic Mazzarella

Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes

1y

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

No problem at all. Another thing to note is that syndication doesn't really make sense for smaller deals since the compliance costs would be too much of a burden.

1 Reply

Anthony Klemm

OP

New to Real Estate · Las Vegas, NV · Member since 2025 · 14 posts · 10 votes

1y

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

No problem at all. Another thing to note is that syndication doesn't really make sense for smaller deals since the compliance costs would be too much of a burden.

I noticed that its mostly for fairly large multifamily properties, like 100+ units.

All other things being equal, at what property valualtion do you think it starts becoming a more reasonable approach? 5$ million? Lower than that? 25$ million? Higher?

1 Reply

Dominic Mazzarella

Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes

1y

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

No problem at all. Another thing to note is that syndication doesn't really make sense for smaller deals since the compliance costs would be too much of a burden.

I noticed that its mostly for fairly large multifamily properties, like 100+ units.

All other things being equal, at what property valualtion do you think it starts becoming a more reasonable approach? 5$ million? Lower than that? 25$ million? Higher?

My attorney that handles SEC registration told me something along the lines of $1.5-2M as a minimum if I remember correctly.

2 Reply

Ronald RohdePro Member

Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes

1y

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

Look at the application, start pricing third party flat fee services for each step. Whats the benefit to registering? REIT? Non traded public REIT?

0 Reply

Evan Polaski

Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes

1y

@Anthony Klemm, cost is just one component. To echo Dominic, typically if you need to raise under $1mm of equity, the formation costs become overly prohibitive. I.e. a security attorney drafting full set of Subscription docs will on average be $7500+. Some of the "package rate" groups start at $15k, but include the compliance reviews of marketing assets, too. But either way, $7500 of $1mm is 0.75%. $7500 of $500k is 1.5%. Given this is a front loaded fee that needs to be overcome in asset performance, it is a lot harder to absorb on "smaller" deals.

As noted, if your options are Reg D, private offering vs fully registered public offering, even if you are talking Pink Sheet (OTC) stocks, you have public filing costs, annual audit requirements, and likely more on-going expenses that have to be covered by the property(s) owned by the offering.

Then you get to the overall scrutiny. Many real estate operators talk about lack of volatility relative to the stock market. Granted, I think this is overblown, but many operators don't want to be publicly traded. It creates far more visibility into the company's operations, their investment decisions, etc.

And lastly, you get to the overall ability of the sponsors. While this is indirect, a less experienced sponsor is not going to be able to attract capital like a seasoned sponsor, regardless of securities being exempt or not. So it gets back to the "minimize costs" for the newer/smaller sponsors.

0 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

1y

Quote from @Anthony Klemm:

Quote from @Dominic Mazzarella:

Quote from @Anthony Klemm:

Newbie here with some questions...

I've been reading a bit about syndications and how they function as a whole. I understand that they operate in real estate under one of a few exemptions from registering as a security with the SEC. However, as curiosity prodded, I looked into the degree that it is prohibitively expensive to consider just filing as a security anyway, irrespective of the pros and cons.

Basically, I searched for "what are the costs for registering a security with the SEC" as well as "what are the costs for registering a syndication as a security with the SEC"

Most the results produced explained something to the extent that the fee was about 150 bucks per million offered, without any other information on what would validate the explanation that filing a syndication as a security is prohibitively expensive. My assumption is that this means that in order to raise 50 million as a security, the fee for said shares would be just 7500 dollars. I couldn't really find much else in my search. What exactly is it that I am missing from my search? What about my search is producing such limited information? What other costs are actually there that aren't coming up in my search that don't exist when simply filing for exemption?

Is it not so much the fee for filing that makes it prohibitive but that the equity offered rules out the viability of being a GP in a registered security this way?

The filing fees with the SEC are usually minimal, as you’ve found. The real prohibitive costs come from the legal, compliance, and reporting requirements of registering a security. These include drafting offering documents, adhering to ongoing disclosure rules, and audits, which can easily run tens or hundreds of thousands of dollars. That’s why many syndicators rely on exemptions like Reg D (506(b) or 506(c))—it’s not about the filing fee, but avoiding the regulatory burden and costs of full SEC registration. If you're serious about this, it's probably time to reach out to an attorney for more nuanced advice.

Thanks for the reply Dominic. It makes sense now seeing that its more about ongoing duties after registration.

Were I in a position to pursue syndication, I would certainly follow your advice and seek an attorney. For the moment though, I am just trying to gain a more robust understanding of all things real estate that I could reasonably see in my future.

If you were looking to syndicate - you are going to do an exemption and not register your securities. If you do a 506c for example assume to create the PPM, subscription agreement and docs will cost between 10-20k. Submitting a form D to the SEC is negligible and then each state someone is in that invests you must file a form d in that state as well which can bea few bucks to a few hundred bucks.

Where you will incur the greatest cost is raising the actual capital and marketing etc.

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SEC registration and exemptions

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