Choosing the Right SEC Exemption for Your Investment: Alphabet Soup

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 syndication, a pooling of resources for investment. Key factors when selecting an exemption include: whether advertising is necessary to attract investors, and whether or not these investors will be accredited.

Four main exemptions are explored in detail. Regulation D, Rule 504, is an exemption that can be complex due to the need to comply with state-specific securities laws, and yet may be chosen if more than 35 non-accredited investors need to be involved in a 90-day period. Regulation D, Rule 506b, allows for up to 35 non-accredited investors and is the choice for many clients.

Regulation D, Rule 506c, is recommended if only accredited investors are targeted and advertising is needed, providing a simple and cost-effective route. Regulation Crowdfunding (Reg CF) allows for raising up to $5 million, but often incurs high fees, and requires all traffic to go through an SEC approved portal. Regulation A (Reg A) is another option for advertising and non-accredited investors, but it is complex, expensive, and time-consuming, often likened to a mini Initial Public Offering (IPO).

Overall, the best options are often Regulation D, Rule 506b, and 506c, due to their efficiency and cost-effectiveness.

Read more about Reg D Rule 506b - Rule 506b of Reg D: Non-Accredited Investors & No Solicitation: https://www.moschettilaw.com/rule-506b-of-reg-d/

Read more about Reg D Rule 506c - Rule 506c of Reg D – Solicitation & No Non-Accredited Investors: https://www.moschettilaw.com/rule-506c-of-reg-d/

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Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, and well as private equity firms. We keep our firm ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers without making you book an official appointment. And we’ll work with your ambitions and overall vision to help you close the current deal and fill-in that ‘missing’ piece - whatever you need - to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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