Every time an investor invest
money into a company, or into a

syndication or into a fund or
something, any kind of vehicle

where they're looking to make
money, but be a passive

investor, so not do the work
themselves rely on a syndicator,

a manager, a sponsor, something
like that, that automatically is

a security. When something is a
security, it must either be

registered with the SEC, the
Securities and Exchange

Commission, or fall under an
exemption. This video is going

to go through what those
exemptions are that syndication

attorneys look to when they have
a client who is a syndicator, or

an investment fund looking to
put an offering out and raise

money from investors.

So what are those exemptions,
exemptions to registration?

Well, first, let's talk real
quickly about what registration

is. Registration really means
going public, right. So it means

getting a whole group of
attorneys together, to pour over

formation documents, getting
accountants to gather, getting

underwriters together, it's
extraordinarily expensive. It

takes an extraordinary amount of
time. Why? Because the SEC is

role is to protect investors to
protect investors from getting

basically defrauded out of their
good hard earned money into

things that they that may not be
that great to invest into. So

the underwriting process and the
review process of a registered

security is very, very strict.
Now, under if it is a private

offering, then that falls under
the exemption. So the exemptions

ultimately is where the SEC has
said, Look, we know that you can

make private offerings, once
that thing is a private

offering, we're going to
regulate it. But we're not going

to regulate it as closely as a
public offering where the entire

public could be exposed to
potential fraudulent behavior.

So it's still regulated, but
less so. So what are those

exemptions, like I said, we're
going to talk about five

different exemptions that exist.
Chief and foremost, number one

exemption of all time is
Regulation D, somewhere between

95 and 98%. Of all private
offerings that exist, are fall

under Regulation D. It is a
very, very well constructed,

very, very workable system to
put a private offering out

there. Now there's two primary
rules that we look to about the

offering. That's rule 506 B and
rule 506 C, under Rule 506 B,

you can raise an unlimited
amount of money from an

unlimited amount of accredited
investors and up to 35 non

accredited investors in any 90
day period. I have another video

for that. We'll link that up in
the notes. Also available is

Regulation D rule 506 C, rule
506 C is similar. You can raise

an unlimited amount of money
from an unlimited amount of

accredited investors, but no non
accredited investor. So what do

you get for this? Well, you get
the ability to make a general

solicitation, you get to
advertise that security that's

out there to the general public
so that people can invest. But

you got to make sure that every
single one of those investors is

an accredited investor. So that
normally comes by third party

verification of their accredited
investor status. Once somebody

is an accredited investor,
they're able to invest and then

they are able to, to do those
things. So those are the two

main rules of Rule five, those
of Regulation D rule 506 B, rule

506 C, I will mention there is
also Regulation D rule 504. And

some of your old school people
may be familiar with this

because it was very common until
Regulation D rule 506 C came out

506 C, letting them advertise
504 kinda let you advertise. The

big problem with Regulation D
rule 504 Is that it had to have

review of every blue sky filing
that would need to be at take

place. So every state's blue sky
laws needed to be reviewed and

analyzed to make sure that it
was compliant. This obviously

caused a huge amount of overflow
and of attorney time, making the

cost very prohibitive. So that's
where Regulation D rule 506 C

was basically born out of that.
And under five oh Six B and 506.

C, the Congress has basically
said, okay, look, under these

rules, we're going to allow this
investment to take place, we're

going to let these, we're going
to let these investment does

take place under there, and
we're going to preempt all the

other states. So it basically
states, the state review is

allowed. So states still have
the right to request to be

notified about them. But they no
longer can say that they get to

be the decision maker, or that
State Blue Sky laws five,

themselves are applicable to the
actual nuances of it. So they

can't determine who can buy and
sell. They can't determine what

different rules regulated
itself, those now are preempted

under rules 506 B and 506. C,
this is important because it

comes back again, later. Yeah,
under regulate. So that's rule

number one. So the first number
one exemption is Regulation D.

Another common exemption, much,
much less probably the the third

most common is regulation, CF
for regulation, crowdfunding,

regulation, crowdfunding is a
good rule, it's rare limits have

now been raised. So somebody can
raise up to $5 million, using

it. The problem is, is that all
the transactions themselves need

to go through a what's called a
registered portal. So if you

think of like Kickstarter, or
things like that, where people

are making investments into
something, which really is a

security, and they're looking
maybe to make a profit, but they

can, what they ultimately are
getting is, you know, is some

chunk of that profit, and it can
be advertised, but everything

needs to take place through that
registered portal. Now the

registered portal is registered
with FINRA, it complies with the

rules of the SEC. And it is
heavily regulated itself. And

it's acting as the guardsman to
make sure that people are not

being hoodwinked and taken into
fraudulent investments. Because

ultimately, that registered
portal is now kind of acting as

a Guardsman making sure that the
offerings are somewhat coherent,

and that they have protections
in place for those investors.

Probably the second most common
so to do these sort of out of

order. And exemption number
three is Regulation A,

Regulation A has two parts, tier
one and tier two. What's

important about Regulation A is
that it actually is a public,

it's kind of like a public
offering. So you can have

investors invest into these into
a Regulation A tier one or tier

two offering. And those
investors don't need to be

accredited they can invest as
non accredited investors. The

challenge that I've found as a
syndication attorney with

Regulation A is that it takes an
extraordinary amount of time and

an extraordinary amount of money
to put this together. Now, why

does it take so long, and why
does it cost so much, because

essentially, the SEC still
reviews these, it's not a

registration, but it's close.
What happens there is the an SEC

attorney will review it, make
sure it complies with the rules

of disclosure that need to be
there, make sure that the four

may one which is the form that
that it's ultimately submitted

on discloses everything and
makes very, very detailed

financial disclosures. And all
those disclosures that need to

take place are not only
expensive, but because they're

under the review of the SEC,
there's a lot of going back and

forth time between attorneys,
accountants, the SEC, in order

to make this thing valid,
average length of time a

regulation, a offering takes us
between six months and nine

months. And the cost and
attorney fees is generally over

$100,000 Just in attorney fees.
And that's not accounting,

accounting fees, which are on
top of that. So those are three

of the exemptions. The fourth
exemption is one that you're

probably not going to use. It's
known as a section 137. A. This

exemption basically says that
intrastate offerings are fine.

So because we have this
securities exemption that says

okay, everything is either a
security and must be registered

or fall under an exemption.
Well, what about those offerings

that are just within one state
where the the sponsor has

decided, you know, I'm in state
X, I want to make all of my

rules under the State Blue Sky
laws of state X, and I want them

to, I want to be kowtow,
everybody's coming from there.

So everything is within that
state. AIT, the SEC is already

has a rule just saying, hey,
look, if it's a 147 a offering,

it's an intrastate offering,
it's not our thing, that section

147 A,

the last one is kind of like a
big coverall. And that's section

four a to section four, a two
offerings, basically are saying,

hey, there are exemptions to the
SEC registration requirement. So

you could think of it as the
chapter heading for regulation,

deregulation, CF regulation, and
even 147. Because chapter the

section four a two says, look,
we've got to, we've got these

exemptions they exist. If it
doesn't fall under Regulation D,

CF, a 147. A, what would happen
is an attorney if they needed

to, would argue, well, it falls
under the exemption of 4824. A

two is not a safe place to be
for you, though, however. So

keep that in mind, don't start
thinking that Well, I don't need

to do the follow the rules of
Regulation D because there's

that section four a two because
four a two is fraught with mine

holes in potholes and things
that are difficult, where

basically, you can fall out
almost immediately, mostly by

not by not complying with the
dollar amounts by not complying

with the review amounts, making
sure that all this indicators

are covered, essentially be like
saying, Okay, I need to comply

with every single state rule,
AD, that is that ever received

marketing material on this. So
if all my investors are from all

50 states, I comply with every
single state blue sky filing for

all 50 states? Very, very
complicated to do. So those are

the main five regulations, the
exemptions that fall under the

that are exemptions from the
registration requirements. As a

syndication attorney, what I do
is I help help syndicators

decide for themselves, what is
the best mechanism for them to

go forward? Almost always, the
answer is Regulation D, because

Regulation D is so good and is
so useful. And the rules are so

straightforward. And it's just
such a perfect, safe harbor for

sponsors, that it's almost
always the right chance, every

now and then there will be
something like well, that really

should fall under regulations,
yeah, for regulation, or

regulation, a or even section
147. So my job is to help in to

help sponsors find their right
calling, go into the right place

that's there. If I can help you
with that, I'd be happy to have

a conversation. The answer
probably though, I'll give you a

heads up is probably going to be
Regulation D. But what I do as a

law firm is not only make sure
that you're falling into the

right exemption from filing, but
also make sure that you're

compliant and that you can
follow through you're not going

to be at risk and lose
everything by being outside of

one of these exemptions. So we
prepare packages may prepare the

private placement memorandum
operating agreement subscription

agreement, notify the SEC notify
the states, as well as just

consulted make sure that our
syndicators my clients are as

successful as possible.
Basically to take them from

where they are today to where
they want to go tomorrow. If we

can help you give us a call.
We'd be happy to help