Posted by John Merchant on April 29, 2006 at 18:45:17:
I recently went through figuring this out for myself here in WA state, and I made an appointment with and went to the State Capital and talked to one of lawyers who work in the Securities Division about this very thing.
Unless you’re advertising for investors multi-state, or across a state line, it’s likely that your RE transaction that involves one REI, one property, one D/T, one note, etc…is exempt from state sec. registration.
BUT I’d recommend anybody looking into this make a trip to your Sec. Division and chat with one of those regulators to see what he/she/they think about your plan and what their regisration requirements are.
Most states’ registration requirements are not onerous and I suspect with a careful reading and then with the Sec. Div. lawyer’s help, finding the right form to use would not be a complex or expensive thing to do.
The BIG issue in any Sec. filing (or lack thereof) is always disclosure…did the promoter adequately, legally and fairly disclose the issues, risks, problems, or did he not? If not, and an investor loses money, I think that promoter is going to be in some difficulty.
It’s my arm-chair opinion that anybody who’s made a serious effort to comply with his state’s laws, and has made a really good effort at disclosing every poss8ible risk and hazard to the REI, is not going to be severely punished even if the Sec. Div. feels more should have been done by that promoter.
That promoter will likely get a “Cease and Desist” letter from the State Sec. Division, ordering the promoter to quit whatever act was offending, and that’ll likely be the end…unless the promoter keeps on, or tries to hide his promotions, etc.