Choosing Between Regulation D and Regulation CF: An Attorney's / Syndicator's Analysis
Tilden Moschetti: There is a
reason why 4.6 times more
private exempt securities
offerings are put under
Regulation D than Regulation CF.
Let's go through what those
differences are so that you can
make your own decision on what's
best for your security offering
when you're choosing an
exemption between Regulation D
and Regulation CF.
So when the big showdown is
between Regulation D and
Regulation CF, the two major
opponents, when it comes to
exemptions from registration
under the Securities Act, now I
there is another opponent out
there and we'll Asterix like
here, Regulation A does exist.
Regulation A though is a little
bit different, because you still
make a filing, and it's reviewed
and approved by the SEC. So it's
not like a true like file a Form
and you're automatically exempt.
So it's a different kind of
opponent. But two big opponents
are Regulation D and regulation
CF. Now, let's talk about the
stats and the differences. In
one corner, we've got Regulation
D, the heavyweight champion of
the world, with 4.6 times more
knockouts than Regulation CF.
Why 4.6? Well, first, you've got
Regulation D breaks up into two
different rules. And one of one
of those rules is the rule that
you'll pick, if you go with
Regulation D, in one corner,
you've err in one hand, you've
got rule 506b 506. B is great.
It's also concert called friends
and family because you can take
non accredited investors up to
35. And then a 90 day period,
and an unlimited number of
accredited investors, you can
also raise an unlimited amount
of money, you're not stopped at
5 million, 1 million, anything,
you can raise $1 trillion. If
you can, if you can give me a
call, definitely we need to
partner up because $1 trillion
is a lot of money. And if you
can raise that much, well, I
want you on my team. But that
aside, Regulation D rule 506b,
so the other fist is a great
regulation, we can raise an
unlimited amount of money from
an unlimited amount of
accredited investors and the
knockout punch for it, you can
advertise so you can put a
billboard on Main Street, you
can plaster the internet with
ads, just to get your name out
there and get your investment
out there. The big trouble with
506c, the one where it gets hit
and they've got that rule is
because we can't take any non
accredited investors. In fact,
we actually have to make sure
that each one is accredited by
having third party verification.
But having the ability to raise
an unlimited amount of money
getting to choose between
whether we have non accredited
or an accredited investor is a
pretty major win for it doesn't
it sound like 4.6 times more
knockouts. But that's not to say
that there's not a lot to be
said for the other opponent,
Regulation CF. Now, regulation
CF doesn't break out into
different rules like that it
just as one rule. So regulation
CF lets you raise money from
both accredited and non
accredited investors. It lets
you advertise. Now, what's the
problem with Regulation CF? Why
isn't it getting more than
Regulation D? Two reasons.
Number one, it's got a cap of $5
million $5 million in any 12
month period, kind of a
negative. The other big problem
with Regulation CF. And to me,
this is the biggest problem, you
still have to do a filing this
time it's on a form C versus a
Regulation D is on a form D your
stuff to do that filing. But
you've got to have all of your
marketing and all of your
transaction go through a
registered portal. Ah, what is a
registered portal, a registered
portal is a third party who puts
your name and puts your
investment out there and take
some of your profit. How much of
your profit I've heard as much
as 10 to 12%, which is a huge,
huge chunk. Now maybe there are
some that are less that take
charge less. But you have to ask
yourself if you're not able to
actually put it out there
yourself. You're still You're
gonna be responsible for
marketing it to drive all your
traffic to this third party
portal, that's not even you, you
don't even get to control that
traffic. So you have to be
driving your own traffic to this
third party portal, where they
also have all of your
competitors investments as well.
And they charge you 10 to 12%
for the privilege, and the
preparation of all the documents
needed for Form C and to comply
with REG CF cost just as much as
that in Regulation D. That's why
when it comes to the ultimate
battle, to me, I think the clear
winner has always been
Regulation D and the stats show
it 4.6 times more, a lot of
people come to me after trying
to do a Regulation CF, it just
didn't work out, it was
expensive. And a complete flop
Regulation D, we can craft a
marketing plan with you to make
sure that your regular offering
is successful. And the the cap
on the lit number of accredited
investor or non accredited
investors isn't that much. If
you've got the right network, if
you don't have the right
network, then you only can mark
it to your right your accredited
investors. But if you've got the
rights pitch, and you've got the
right story, your Regulation D
offering is gonna be successful.
So now it's time for you to make
your own decision on what works
best for what you're offering.
To me. It's always Regulation D.
So if you give me a call,
wanting to talk about what the
two differences are, I'm always
gonna say Regulation D, I'm
happy to have a conversation
comparing and contrasting the
two, but just know I'm always
going to be on the side of
Regulation D, it's the
heavyweight champ and you don't
go against the champ. But I'm
always happy to have that
Regulation CF is a fine choice.
I may be in favor of Regulation
D but it's still a very, very
good choice. Regulation CF
though has those negatives. And
then a plan can be worked out
around those in order to solve
it through Regulation D. Or if
Regulation CF is the right
choice for you. That's great
too. Now if we can help you
either make that choice or if
you need help with your
Regulation D offering, give us a
call and let's see if I can help
you