How to avoid securities violation? - Posted by ROBERT


Posted by Robert (Atlanta) on January 16, 1999 at 20:54:20:

I thank everyone for their advice.


How to avoid securities violation? - Posted by ROBERT

Posted by ROBERT on January 12, 1999 at 22:12:46:

I have several individuals that are interested in lending their money to my real estate company for extra income. What are some “simple” ways of making this work without triggering any securities violations?


Re: How to avoid securities violation? - Posted by Mark R in KCMO

Posted by Mark R in KCMO on January 13, 1999 at 16:15:04:

I agree with everyone who says to seek the opinion of an atty, but I am going to add what was I think was implied, advice from a SECURITES atty, I understand that most attys have some knowledge of the basics of securities law, but you need a specialist.

With that being said, there are differences between investing in a piece of real estate, and in loaning you money using real estate as security. Make sure all parties know what your intentions are, and be specific in all presentations.

Hope this helps

Mark R in KCMO


Re: How to avoid securities violation? - Posted by JHyre in Ohio

Posted by JHyre in Ohio on January 13, 1999 at 07:10:50:


The definition of “securities” for federal purposes is VERY broad. For example, someone selling profit interests in a Florida orange grove had his sale defined as the “sale of securities”. There are exceptions as mentioned by the other posts, but be SURE you fall under them.

The most commonly used federal exemptions are: offerings to less than 35 individuals or offerings to “accredited investors”. Last I looked, accredited investors include individuals with $150,000+ annual income OR $2,000,000 net worth. Those numbers are strictly ballpark- I have not dealt with the securities laws for some time. Most (but not all) states follow these exemptions. Check with an attorney for the details. You do NOT want to run afoul of these laws. The penalties are draconian and often involve a stay at the Federal Hilton with involuntary nocturnal visitation.

The irony is that in order to protect the public, the securities laws (and these exemptions in particular) shut out the public and reserve the good deals for the “rich”.

John Hyre


Re: How to avoid securities violation? - Posted by JPiper

Posted by JPiper on January 13, 1999 at 24:56:24:

Understand that the securities laws are complicated. They are comprised of both federal and state laws. It?s possible that each state is different, although many states have adopted a form of the Uniform Securities Act. You should check the law in your state, and also run anything you intend to do past a lawyer specializing in securities law.

Having said this, in many states there is an exemption for securities secured by real estate. So IF your transaction is exempt from the Federal law, and IF it is secured by real estate, you may not have any problem.

Lending money to your real estate company may not be exempt. Lending money secured by real estate may be exempt. I would not group different individuals into the same investment without first checking with an attorney to make sure it?s not outside the scope of the exemption provided for real estate.

And again, check your state law to make sure there is an exemption for a security secured by real estate.



Re: How to avoid securities violation? - Posted by Irwin

Posted by Irwin on January 13, 1999 at 06:45:26:

I can’t emphasize Piper’s advice to consult an attorney on this too much. Anytime you take other people’s money to “invest”, you are wide open for serious trouble if anything goes wrong. Therefore, don’t do this unless you are experienced, and very, very sure that nothing can go wrong with your deal.
Putting several investors funds into one pot is called “pooling” and should be avoided. Generally, putting several investors on the same real estate mortgage is not considered a regulated security, but again, check this with a lawyer where you are because state securities laws vary.