Can non-US people invest in your syndication or fund offering? Today we’re going to talk about that. My name is Tilden Moschetti. I’m a syndication attorney with the Moschetti Syndication Law Group specializing in Regulation D Rule 506b and 506c offerings.
Let’s face it, we live in a very international, interconnected world, with investors located throughout the globe in every region. If it was the case that the United States said, “No, we don’t want any foreign money coming in to make our sponsors of syndications and funds more wealthy,” well, that would be a darn shame. There sure are a lot of investors out there in other parts other than the US and a lot of capital to invest and grow wealth here within this country.
Fortunately for us, investors from non-US places can invest in your syndications and offerings. If you’ve put together a Regulation D offering, US investors from non-US places are actually coming in through a different rule, called Regulation S, which allows investors to invest if they’re not located in the United States.
The rules are very similar to those within Regulation D, except for two minor points. Under Regulation S, we are not as concerned whether or not they are an accredited investor. So if you have a Rule 506b offering, we do not count the people who are non-accredited investors if they’re not in the United States. Likewise, if we have a Rule 506c offering, we don’t need to get a verification of accredited status of that investor.
Now, we do need to make sure when we’re doing a 506b offering that advertisements for people not within the US are possible. But it cannot be something where the advertisement came into the US. We need to take a lot of measures to make sure that the advertisements made are very specifically to non-US people. Because if a US person were to see an advertisement for a 506b offering, then it’s suddenly a big problem, as you’ve broken the rules. You’ve now had a general solicitation inside of a Rule 506b offering, which isn’t supposed to happen.
The second thing is on the resalability of the security itself. Under Regulation S, investors are limited to not being able to resell their security for one year. So we need to make sure that is known to the non-US investor as well.
You cover those two things, and you make sure that those are in your private placement memorandum. And the good news is yes, you can take investor money from those non-US people. It’s something that I talk with my clients about very regularly; it comes up in nearly every context, sometimes with just one investor and sometimes with a whole bunch of investors.
Now, we can’t guarantee that raising money from those non-US investors won’t violate the rules in other countries. I don’t practice in any other country other than the United States, and I don’t know the securities laws of any other country. So there is that caveat, and it’s a good idea if you’re targeting a specific other country to speak with an attorney about those rules as well to make sure that you’re not going to run afoul of their rules. But under the US rules, you will be fine.
So my name is Tilden Moschetti. I am a Regulation D securities attorney specializing in rules 506b and 506c.