Tilden Moschetti: Hey Tilden, Moschetti syndication attorney with the Moschetti Law Group, I put together private placement memorandums under Regulation D rule 506 B, and rule 506 C for syndicators,
or businesses trying to raise capital or crypto miners or really anybody who's trying to raise money that actually is a security. That's me, I'm the guy to help you. So today I want to do a deep dive
into a question that I get quite a bit when people see private placement memorandum from me. And that is a section on the limitations on resale. It sounds scary, and in some respects, it might be
scary. But let's go take a deep dive and see exactly what we're talking about.

Tilden, Moschetti syndication attorney with the Moschetti law group doing private placement memorandums for syndicators just like you, today, we're going to take a deep dive into limitations on
resale. And just like summon in some of our other videos, we're going to actually look at the code section. But before we do that, I want to talk in general about what we why there are limitations on
resale and what the SEC is thinking. So, in general, a an offering is made with is required to be registered with the SEC. Now there are some exemptions to registration under the Securities Act, one
of those is Regulation D, under Regulation D private offerings do not need to be registered, yes, you do need to file a Form D. But that's all it really needs, from the SE C's point of view is, is
that you've done all the things that are required of it, and that you file a Form D, it does not need a formal registration. In order to do this, the SEC has made some rules around to limit exactly
how this takes place. Some of those are described in great detail and rules in 506 B are in 506 C about what's allowed and what's not who's allowed to invest and who's not or how to do certain things.
One of these things is it is necessary under the rules to inform your investors that there are limitations placed on resale. Because what the SEC doesn't want is for syndicators to basically put this
all together, put it out into the marketplace and have a secondary market get born up out of this whole money pool that's outside of their regulation. So this that, that created this limitation on
resale to try and stem that secondary marketplace from arising. So to do that, let's look at what the rule is. Sue, let's go to the whiteboard. There it is. And we're talking about rules 502 D, which
talks about the limitations on resale. Now, and this is except as provided in Rule 230.504 (B) (1). Do not be can be confused. This is 504, not 506 B. 504 B is very different from 506 B, actually 504

B isn't used that commonly in my experience, it is certainly there and it can be used. But it often times is a little bit more complicated to put it together. And so most indicators use 506 B or 506.
C. With that digression aside. Let's talk again about limitations on resale. So any security that's acquired in a transaction under Regulation D shall have the status of securities acquired in that
transaction under section four, a two of the act by the act, we're talking about the Securities Act of 1933. And it cannot be sold without registration under the act. So registration, that's what
we're trying to avoid and a private offering or an exemption there from so Regulation D for example, the issuer shall exercise reasonable care to assure that purchasers of the securities are not
underwriter, so they're not people who just go out and are public packaging up these bundle of securities in order to take them to that secondary marketplace. And reasonable care may be demonstrated
by the following. So they give us some examples on how exactly you can demonstrate that reasonable care.

So first off, and I'm going to tell you in what documents we do all three of these. So because there's three examples right there, so we're going to tell you where we do them all, for you. So number
one is a reasonable inquiry to determine if the purchase is acquiring the securities for himself or for other persons. This is one of the reasons that I believe that every package that contains a PPM
and operating agreement and a subscription agreement should also include an investor questionnaire. One of the questions in our investment questionnaire that we prepare for clients. Is this question
are you buying? Who are you buying these securities for? That establishes rule number one, the This demonstrated act number one, you're making that inquiry. Now, oftentimes, that inquiry also takes
place in the negotiation of what exactly it is, or in the sales process of that security, where you're talking to an IT potential investor, and you're saying, Are you going to be buying this for
yourself or for another person, that happens quite a bit. But another place that we actually document that happening is in that investor questionnaire. Number two is a written disclosure to each
purchase or prior to the sale, that the securities have not been registered under the Act, and therefore cannot be resold unless they are registered under the act or unless an exemption from
registration is available. So on our PPM itself, the very first page that we put up there, it says that these securities have not been registered under the Act and therefore cannot be resold unless
they are registered under the act or unless an exemption for registration is available. So we're making that written disclosure on page one, we're also making it in various other sections where it
would be applicable or May, we want to call it out, to make it very clear to investors that you can't just buy these for the purpose of resale. So therefore, we have met number one, and number two on

those on those. So here is the PPM. And a number one, again, was the investor questionnaire. In number three placement of a legend on the certificate or another document, that evidence is the
securities that stating the securities have not been registered under the Act and setting forth or referring to the restrictions of transferability in the sale of securities. So again, most of most
syndicators are do not issue membership certificates. But if they choose to that should be on the certificate. Where we put this on, when we put together the packages that we put together, is we put
this in the the subscription agreement, the subscription agreement is that agreement between the syndicator and the investor themselves, that states amongst other things that they know, and they've
been informed that the securities have not been registered under the Act, and that they should refer to the restrictions and transferability of the sale of securities, and that they will abide by
those rules. So we cover it in all three of the suggested ways where reasonable care may be demonstrated. So again, this is the rule on limitations on resale. So what exactly do we mean by
limitations? So when we're saying limitations, we don't mean that you can't completely resell these. What we're saying is, is that or the SEC, what it is saying is that you can't have an investor go
and purchase these securities, merely contemplating that the security itself will rise and then they will resell it. The purpose of these is not for resale of the security itself. It's for the profits
that will be gained within the security right so that that security is paying out cash dividends sometimes or it's paying out a reversion or it's paying out something in order to give the investor
value. But it's not its purpose is not for like you think of the stock market where Apple shell shares are selling at this, and we're hoping it goes up by 5%, at which point I'm going to sell it.

That's not the point.

So the other limitations are and how we address that is, so if you can't just have create a marketplace to sell this, what can you do? So say one of your investors gets into a situation where they
really need the cash that they've contributed to your investment and you'd like to help them out? Well, typically, what we do is we create a first right of first refusal. So right of first refusal
gives you the manager or your members, or both of you, or gives somebody the right to buy those securities from that initial member and, and put them in your own account. Now you guys can negotiate
price of what that should be, what fair what a fair price would be. And, but we'd like to give you guys the initial shot, I want the manager to get it because you are the manager in this in this case.
And I want you to have the ability to increase your own stake if you want it. Second, it's great to have the the members also have a bite at the apple two, because those are members that you already
like and are already part of your investment. And they're obviously happy if they're interested in buying more shares. And so you already know them, it's already established. Now should those fail,
then they can go and sell their securities to other people as well, you, they just need to come to you first typically. And they can find people as long as that whole purpose wasn't to just resell
them. Or they can transfer them to their family or children. That's very common for something like that to happen. But the purpose was not in that that resale capacity. So I hope that explains those
limitations on resale. So there are limitations. They're not you can't ever do this. But it is also very specific that don't go and try and create a market and we make it very clear for the investors
that they can't just go and do that so that you're complying under Rule 502 D. So again, my name is Tilden Moschetti. I am a securities attorney. I specialize in Regulation D offerings. We focus

exclusively on syndication and I write private placement memorandums, operating agreements, subscription agreements, investor questionnaires for syndicators, businesses, anyone trying to raise capital
and that raising of capital amounts to a security. Those are who I help exclusively under Regulation D. That's my focus. That's all we do. Now, if you're interested in getting our help, we'd be happy
to talk with you. We do free consultations, you just give us a call at 818-696-5007 or visit us online at www.moschettilaw.com and sign up for a free consultation. And if you decide to hire us we do
flat fees. We have very fast turnarounds. Our standard turnaround time is two weeks, which is probably the fastest in the industry. And it's certainly the fastest when you consider that we don't use
templates or anything like that i custom draft each document for my clients. I do not delegate this to to junior staff. I do it myself. I want to have a relationship with all of my syndicators. I
understand their businesses. I like helping them and I'd like to help you too. So give us a call if you think we would be a good fit. Also, if you liked this video, feel free to subscribe we do post
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