Episode 2 – How do I market my Regulation D Rule 506 offering?

My name is Tilden Moschetti. I’m the founder of Moschetti Syndication Law Group. I’m a syndication attorney. One question I oftentimes hear from syndicators is: “How do I go about marketing a private placement offering?”

As a syndication attorney, I’ve frequently heard the question of how exactly to market an offering. The answer actually becomes a little bit complicated because of the rules of the SEC. I’m going to go under the assumption that we’re talking about Regulation D offerings. We’ll talk a little bit about other kinds of offerings in a second, but I really want to focus on Regulation D, because most of my clients are doing that.

When somebody wants to do an offering through Regulation D, most of the time, they’re either talking about Rule 506b or Rule 506c. For Rule 506b, when it comes to marketing, the answer is no, you don’t market the property or the investment. You can’t market under 506b. The SEC is very clear: this is not for public consumption. This is something that you only discuss with people that you have a substantial business relationship with. You cannot advertise it in any form. They very specifically call out what syndicators used to do, where they would put on seminars and invite people to market their offering. You can’t do that under 506b.

Under 506c, however, you can market all you want. Because under 506c, you are not going to be taking any non-accredited investors. You could put up a billboard, you could put an ad in the newspaper, you can put it on the internet, you can put it on social media – whatever it is, you can advertise to your heart’s content. I’d advise you to say “this is for accredited investors only” because it’s kind of annoying to have to field calls from non-accredited investors and say, “Sorry, you’re not able to invest in this.”

You can actually start advertising immediately, before you’ve even done a private placement memorandum, before you’ve done anything else. The only restriction is you can’t advertise it and then take their money without putting those additional things in place. You need to make sure that they are accredited investors before you take their money. They should get a copy of your private placement memorandum, the operating agreement, and then they can subscribe through that subscription agreement. That’s the best way to do it. But you can start advertising immediately.

Now, I promised you earlier that we’d talk about a couple other ways to raise capital. There’s also Regulation A, which is different than Regulation D substantially. Under Regulation A, you are actually filing documents with the SEC for their registration. Regulation D is an exemption to registration, while Regulation A is actually registering with the SEC. They review it, and there’s a lot of work that goes into making sure that a Reg A offering is a good offering before you get approval from the SEC to start collecting money. But like Regulation D, under Regulation A you can start advertising it immediately. You just cannot take any money until it has been approved.

The last one is Regulation CF. CF stands for crowdfunding, and its whole purpose is to be able to raise money in a crowdfunding-type environment. The restriction there is that all the money that comes in must come in through what’s called a registered portal. This isn’t just a website that you put up your own portal. It must be registered with FINRA, which is a regulatory body that works with the SEC to make sure that offerings are disclosed in the right way and that the investors know what they’re getting into. So a Regulation CF is okay to advertise – you as a sponsor can advertise it, but all the money that comes in must be going through that Regulation CF investor portal.

So those are the ways that you can market your offering. Again, for Regulation D, we’re talking 506c, market to your heart’s content. For Regulation 506b, you can talk to your friends and family, but I would not talk about it elsewhere. It just is not worth it.

If you need some help with your syndication, be it for real estate, you’re an entrepreneur raising some capital for your business, or you’re putting together that new cryptocurrency hedge fund, give us a call. My name is Tilden Moschetti. I am a syndication attorney, and if you need help just with your private placement memorandums, we’ve got you covered there too.