This is the first of seven
videos as part of a series on

how you as a syndicator, or a
fund manager can stay out of

trouble and be in compliance
with both the states and the

SEC. So that you can do what you
do best. Run your syndication or

run your fund. My name is Tilden
Moschetti. I'm a syndication

attorney with the Moschetti
Syndication Law Group.

This first video is going to go
through regulators those big

scary things, or are they scary?
What's their purpose? How is it

all set up? So that way you can
understand who you're up against

or not up against as the case
may be. Now, why am I being

cagey? And toying with you know
who you're up against and things

like that, because regulators
themselves are not the bad guy.

Regulators are actually the good
guy here. So regulators job is

to protect people like your
family members who may not know

better and fall prey to
unscrupulous fraudsters. We

don't want that happening.
That's not a good thing. And

there are a lot of them out
there. There's a lot of

fraudsters, and so they're the
SEC is job, the state regulators

job is to keep those people
away. These rules, the rules

that we operate under when we're
doing Regulation D syndication

are to protect the public from
those fraudsters. So it's

allowing you to be able to do
what you need to do to raise

money so that you can deploy
that capital, make money for

your investors and make an
income for yourself as well. But

it's to keep those people who
are committing fraud away. And

that's what the whole point of
it is. So who are regulators?

Well, regulators either come are
either part of the SEC, or

another regulatory body within
the federal government, or state

regulators. Both of them have
these people who regulate

securities. Who are the people
exactly? Well, the people are

actually very, very intelligent,
quality people who care, they

are mission driven to make to
protect the investing public.

That's a good thing, right? We
want these people protecting

your family. Think of it like
police officers, a lot of police

officers do their job, probably
the vast, vast, vast majority,

because they want to protect the
public, they want to help

people, right. And same with
security regulators. Their whole

mission is just to protect the
investing public, and protect

the markets as a system as a
whole. We need that as a

capitalist society, we need to
protect those people. So that

way, capitalism can actually do
what it does best. And it keeps

the people who want to cheat and
lie and steal away. So

regulators, we love you, great
job, keep doing what you're

doing. These videos are how to
stay out of trouble with them.

It's not about how to be sneaky
and get around them because

they're doing the right thing,
right? These regulators are

trying to help the system. So
these videos are how we can

actually help them by making
sure our stuff is in compliance

with the rules. It's in the
compliance with the rules. Sec

loves it. FINRA loves it. The
state regulators love it,

everybody's happy. There's
rainbows and unicorns

everywhere. That's what we're
looking for is that kind of

compliance, where everybody gets
to be happy at the end of the

day. So how does this system
actually work and in its

nuances, so let's break it down
by looking at a whiteboard. So

you are looking at offering a
security and you are in the

state of Florida. For example,
forgive my drawings because I'm

not the best artist in the
world. But let's say you're in

Florida. You're right here.
You're in Florida. You I've

identified a let's use real
estate syndication as an

example. So you're in Florida,
you've identified that you want

to develop this beautiful
apartment building in Florida.

You've identified three
investors all in Florida who all

want to invest with you and they
want to contribute they want to

grow this property. Everything
is great. Now you have a choice.

As a as a resident of Florida,
yourself. You can File this

under We call the State Blue Sky
laws. The State Blue Sky laws

are the laws about securities
that each state has, we call

them blue sky laws, because
we're talking about, you know,

that they're, you know, there's
a land of the free and you know,

blue skies everywhere. Not
important why the State Blue Sky

laws are to protect the art to
protect investors in the state

of Florida. So the state of
Florida, if you have investors

in there, they're set out to
protect the state law, the

investors from Florida. So you
have this offering, you put it

together, everything is good,
you do the necessary filings

under Florida rules. So then
we're talking about in Florida,

everything is in Florida,
everything transacts from

Florida, everybody's happy. It's
all takes place. under Florida's

rules, if you choose because you
don't have to, you can also

choose to go under Regulation D,
for example, which would allow

you to market to other people.
But in this particular instance,

you're marketing to Florida. So
we're a big country, and again,

forgive my very poor drawing.
And then Texas kind of goes

there. It looks something
vaguely like that. And we've got

Alaska. Now we've got Hawaii.
Right. So that's the United

States in a very ugly format. So
you just you have a possible

investor, oops. You have a
possible investor, who is in

Texas. And he's heard about your
deal, because he's a good friend

of yours. And he wants to now
invest in this entity. Well, he

can, but not under the State
Blue Sky laws. What would

happen? Why is that a problem?
Because Texas, Texas is

interested in protecting its
people, right? It's pretty

interested in protecting its
investors, its citizens. So

Texas won't be very happy. If
you decide to file in, if you

file just under the State Blue
Sky laws of Florida. So you

still have kind of two choices.
This has now become a federal

issue. It's now a federal
matter, because we've got two

states. So we call that
interstate transaction is taking

place, right between multiple
states, you could decide to

lodge this all under four, a two
of the securities regulation. So

what four a two lets you do is
it lets you enter it lets you

put together offerings for
interstate transactions. But it

needs to comply Exactly. With
both Texas and Florida law. So

now you need a lawyer from both
Florida and you need a lawyer

from Texas to help you figure
out how to stay compliant with

both of those. So you've got
this project almost up and

running. And now you've got
somebody in California who wants

to invest. Calif, California and
Texas are also both states that

are very, very, very protective
of their citizens when it comes

to securities regulation. As is
and I can't draw New York, as is

New York. Very, very, very
protective of their of their

citizens. They also want to
invest. So now if you decide to

do this under regulation for a
two, you need a lawyer from

Florida, you need a lawyer from
Texas, you need a lawyer from

New York, you need a lawyer from
California, all to put this deal

together because for a two
requires if you're going to do

this right and comply. It
doesn't. It does. It's basically

says hey, we're not in violation
of federal law for doing this

but ya gotta be in compliance
with state laws. So now you've

got four states that are all
vying for for supremacy really,

really kind of a challenging
situation for you. What if

instead of 482 we say now I want
to use Regulation D. And

specifically, I want to use
Regulation D rule. 506 B, or it

could be C, but I'm just
choosing one because you all

know, you know, these people. So
this guy here, he knows

everybody in those states.

So why am I letting narrowing it
down to 506 B and 506? C,

because 504 rule 504 of
Regulation D actually doesn't

get us out of the struggle of
all these different states

having these interests under
Rule 504, you still have to

comply with every state rule.
But why don't we under

Regulation D rule 506. Because
Regulation D rule 506 says,

okay, states, listen up. We're a
federal country, the country is

federal yet got rights, states
rights are important. But come

on, this is going this is
creating a nightmare for

everybody. This guy just wants
to develop his property. He just

wants to take investors, these
investors just want to make

money. So we're gonna make rule
506. And rule 506 says, okay, no

matter what, where are your
people are from under Rule 506,

the offering and sale of a
security, this becomes important

later, that's why I'm making it
clear, the offering and sale of

the security is, is part of the
federal system. If they want the

Safe Harbor, of rule 506,
Regulation D, they can, and

we're gonna just preempt all the
states rights, we will of

course, you can require notice
and things like that. So that,

you know, these activities are
going on because states rights

are important. We want states to
be able to know what's

happening. But we got to make
this all work. So five rule D,

Regulation D rule 506 B, states
can get noticed. And that's it.

The rest of it is Regulation D
rule 506. It's under the nice

auspices of the SEC. Okay, so
that that's all good. That all

make sense. All right. So let's
kind of clean up a little bit.

So we got lots of arrows
everywhere. All right. So we've

got these, we still have these
investors, right. So let's get

rid of that arrow. Oops. So
we've decided we're going under

SEC rules, regulation D rule
506. So now we've got regulators

from the SEC, who are helping to
protect these people helping to

protect everybody in the
investing public within the

United States. And to regulate
this guy, make sure that this

guy is doing what he's supposed
to do. Because there's actually

other rules for people outside
of the United States. But we're

going to talk about that one in
another video. So there are some

nuances that cause compliance
issues can happen for people

outside of the United States.
But we'll deal with that when we

talk about inadvertent
advertising and an inadvertent

solicitation under Regulation S,
which is compatible with

Regulation D. So stay tuned for
another episode. So SEC

interested in that. But what
about this guy here? What about

him? New York is very, very
interested in protecting him

still. It's all well and good
that they have to get that they

can get notice of it. But then
New York really wants a little

bit more. Right. So New York
actually has more of an interest

of protecting its people than
just Notification. Now, there's

a lot they can't do because of
its Regulation D rule 506 B

encompasses everything. Right.
But remember what I said it

covers the offer and the sale of
the security, right? So it

offers it covers the offer and
the sale of the security. What

it doesn't cover is when this
guy is talking to his friend in

New York, and working on getting
the sale. It doesn't necessarily

cover the the actual sales
process. Now, most of the time

and does but as we'll see,
again, in another video when we

talk about improper structures,
the problem move funds of funds.

We look at this guy, New York's
looking at this guy and going

okay, well, he is in the process
of selling that security, which

is fine for the transaction
itself. But what about the

actual of the making of the
sale? What about the deal, the

broker dealing kind of
activities in that? Maybe we can

regulate that? And the answer is
they might be able to. And

that's what we're going to talk
about in the improper

structures. video that explains
just what goes wrong when this

when this happens. So now we've
got state regulators who

definitely have an interest,
they also have an interest

because they require that
notice. So if they, they they

require that notice of the
Regulation D most states do

almost every state requires
notice. It if they don't get

that notice, why weren't they
noticed, they want to be noticed

there, they are expecting to be
noticed. And if they don't get

it, that may or may not cause
issues. So this is a game where

ever states are continually
trying to make sure that they're

upping their regulation, states
want to have this heavily

regulated as much as they
possibly can. Now Regulation D

kind of keeps things down, it's
trying to keep it down, but the

states keep trying to push it
back up. Fortunately, for us,

most of the time, because of
federal preemption, it's able to

keep it all down, right, it's
able to keep that down. So we

comply with the notice rules and
things like that. And that

mostly keeps things at bay. The
times when it doesn't is when

the state regulators see
something funny going on. So the

if you go outside of this
boundary, if you try and walk

outside of this boundary of Fe
Regulation D, that's when the

state regulators get hungry. So
that's sort of the the issue

when it comes to the SEC. So
we've got the we've got

Regulation D as this giant
umbrella. term that looks like a

nice, even umbrella. And then
we've got Regulation D. But

there's also the state here.

So you're covered, as long as
it's dripping right here. Right?

Then it's all under nice federal
rules. It's very simple and

straightforward. Problem is what
happens when a drifts there. And

accom oops, you can't see that.
What happens when it drips

there, and it's falling on the
state jurisdictional issues.

That's when states start
regulating. So hope that was

interesting. Hope that puts the
whole kind of regulatory context

in put in place for you. Because
we've got two systems going on,

we've got this federal system,
and we've got state system going

on. We've got regulators from
both each, his job is exactly

the same. They want to protect
the investing public and the

overall market. So they're,
that's their job, and they want

to do a good job. And we want
them to do a good job, because

we do want to keep on
unscrupulous people out. So

that's how the system works.
This video, this video series is

going to go through the biggest
problems that I see as a

syndication attorney, of people
where they go awry. So where do

the security regulators go?
Excuse me, I, what you're doing

there? Let's back up a minute, I
think there might be something

wrong. And when they say that
they probably could be right.

And if they're right, you know,
first we need to know, are you

in trouble? Did Did did a line
get crossed? Because they

couldn't be wrong? And if they
did, if you did cross the line,

well, how much did you cross the
line? And what's the problem?

And what's the remedy? I mean,
is there a way to fix this? I

mean, obviously, if you're
stealing money in your fraud

stream probably should go to
jail. But those are my clients

and those aren't you I'm sure
because Why are you watching

this about how to be compliant.
If you don't want to be

compliant, right, thieves want
to be thieves, they're gonna

steal that's their thing. People
watching these videos, you're

not those people. So this video
series is going to go through

just where those lines are
because you want to do a good

job. You really, really don't
want a regulator who's looking

closely at you trying to Do the
right thing for the investing

public because you're gonna be
wrong. If they are right. So if

they are right, you are going to
be in the wrong and there's

going to be heavy penalties for
it. So I hope you're looking

forward to these videos as much
as I am. They'll be coming out

on a weekly basis over the
period of next several weeks.

And I hope that you like and
subscribe it. My name is Tilden

Moschetti. I am a syndication
attorney with the Moschetti

Syndication Law Group. We
specialize in Regulation D,

Regulation D, Regulation D,
that's all we do. We help our

clients stay compliant with the
rules of the SEC and the state

regulators. Because we want to
not only be compliant, but we

want to make sure that you're
successful. We want to do

everything that is in our power
to help you be successful so

that you can make much, much,
much more money. And then you

can enjoy the wonderful benefits
that we have under Regulation D

how amazing is it that you can
put your own security together,

you don't have to be a giant
company in order to put raise

money from investors, put it
into the world, do good things,

do big projects, make the world
a better place and make lots of

money for you, yourself and your
investors at the same time. I

love Regulation D. So that's
what we're working on. Those are

what the videos are. Thanks a
lot.