latest news from
Regulation D Resources

Our Direct Regulation CF Services have Launched! Execute a Direct Reg CF at 1/3 the cost of the traditional CF platforms. Call today for more information: (720) 586-8610.

Our offices will be closed Monday, Sept. 6th in observance of Labor Day. We hope everyone has a safe and happy holiday weekend!

We will re-open for business Tuesday, Sept. 7th at 9am MST.

The streamlining of the old Regulation A program into Regulation A+ has been a game changer for companies seeking a sophisticated vehicle to generally solicit the public for investment and raise funding from all investors (accredited and non-accredited).

Regulation A+ has been especially popular with real estate fund sponsors.  Following are a few reasons why real estate sponsors are choosing Regulation A+ for executing syndications:

1.  Lower Audit Costs for Preparation:  Since most real estate funds execute as newly formed special purpose LLC’s or LP’s – the Tier 2 Regulation A+ audit requirement is applicable to the opening balance sheet only for that entity.  Most newly formed entities will have little to no financial activity so the audit cost is minimal (typically under $1,500).

2.  Real Estate is An Asset Class with Broad Appeal:  Real estate funds tend to do well syndicating capital in the public domain because the asset class in general is something average investors can understand and are comfortable with the investment exposure.

3.  The Nominal Cost and Timeframe Differences from Regulation D Provides a Much Better Syndication Vehicle:  Regulation A+ offerings do require nominally more time and expense to prepare and make ready for execution.  With that said – most real estate fund sponsors are not under purchase contract timelines since the funds are executing as a blind pool vehicle.  Further, since most real estate funds are raising larger amounts of capital – the Regulation A+ offering will provide substantially higher capabilities for successfully syndicating capital than a Regulation D offering.

Interested in Regulation A+?  Call us today to discuss!  (720) 586-8610.

Real estate funds tend to have multiple fees that are paid to the Fund Manager. A typical real estate fund fee structure would include, but not be limited to, Fund Management Fees, Asset Acquisition Fees, Asset Disposition Fees, and Construction Management Fees.

One permutation of the Fund Management Fee structure we have seen in real estate funds before is where the Fund Management Fee has a deduction for general and administrative (“G&A”) expenses for operating the Fund entity.  We have seen (on fund vehicles prepared outside our firm) where this arrangement has created serious issues for the Fund Manager as the Fund’s portfolio growth requires more infrastructure to operate and thus the G&A expenses rise in conjunction with such expansion.  The issue is most Fund Management Fees are fixed and thus, as the G&A expenses rise, the Fund Manager realizes less net from the Fund Management Fee.  We have seen instances where almost the entire Fund Management Fee was being used to cover G&A expenses.

In our opinion – the Fund Management Fee is compensation to the Fund Manager and, as such, should not be used to cover G&A expenses for the Fund’s operations.

Interested in executing a Regulation D or Regulation A+ Offering to syndicate capital?  Call us today to discuss!  (720) 586-8610

Regulation CF, commonly referred to as “crowdfunding”, recently saw a rule change that increased the annual capital limit to $5,000,000. While many companies may entertain executing a Reg CF to raise funding – Issuers should be aware that executing a Reg CF using the traditional platform model carries with it exorbitant offering expenses and commissions.  Based on recent changes in the SEC rules – there is now a lower cost option for executing a Reg CF – a “Direct CF”.

Reg CF sales must execute through either; (a) an SEC approved and broker dealer managed Reg CF Portal Platform or; (b) through an approved SEC intermediary (a FINRA broker dealer).  The traditional portals typically charge between 8-10% on all capital raised by the Issuer through the Reg CF offering (and that commission does not include offering preparation expenses). Direct sales from the Issuer to investors are not allowed under Reg CF.  Thus, even though the Issuer may execute a marketing campaign to their social media base or to the public – any investor leads they generate for the Reg CF Offering must be sent to the CF portal wherein they will be subject to the commissions charged. So – not only does the Issuer have marketing costs for the offering but all sales will be subject to the portal commission. An Issuer raising $4,000,000, for example, and using the old traditional CF platforms, could easily see the overall commissions and expenses for such capital exceed $400,000-$500,000.

The “Direct CF” model involves bypassing the traditional platforms and executing using a single broker dealer hosted and managed platform that is unique to the Issuer for processing the CF securities sales.  The benefit?  The commissions are approximately 3% and total execution costs can be 1/4th the cost of using a traditional platform.

Interested in learning more about a Direct CF Offering?  Call us today to discuss:  (720) 586-8610.

Please note we will be increasing the fee for our Regulation D Offering Preparation Services from $7,000.00 to $7,500.00 on March 23, 2021.

Any Regulation D Offering Preparation Accounts created after 5pm MST on March 23, 2021 will be instituted at the new services fee rate.

Regulation D 506(c) offerings provide the issuer company with the capability to engage in general solicitation and advertising of the offering and investment opportunity to the public with the qualification that all investors are accredited, provide suitable verification, and that the appropriate legends are deployed in promotional materials.

Here are three ways a Regulation D 506(c) Offering can be promoted to the public:

1.  Press Releases:  A press release is an excellent method of letting the general public know you have an offering in place and an investment opportunity available.  Further, a press release also “seeds” search engines with additional results on the company and the securities offering for when investor prospects research your company.

2.  Social Media Promotion:  Leverage your social media sphere of influence by promoting your offering to those groups.  Many companies that execute a 506(c) offering will have deep social media assets that can be leveraged to gain investor prospects including Linkedin, Facebook, and other social media platforms.

3.  Corporate Website Promotion:  Many companies executing 506(c) offerings will have corporate websites that are attracting thousands if not tens of thousands of visitors each month.  The company’s corporate website can then be used to notify visitors that an investment opportunity is available and direct them on how to evaluate the offering and determine if they qualify to invest.

Most modern securities offerings that allow general advertising, like a Regulation D 506(c), are being administrated using technology.  Using an investor web portal, like the Regulation D Resources Investor Web Portal, to engage your prospects and track them through the investment subscription process is an invaluable tool.

Interested in raising capital via a Regulation D 506(c) offering?  Call us today to discuss: (720) 586-8610.

As we leave 2020 in the rear view mirror we look ahead to 2021 with hopes that we can see a return to normalcy within our business environment.

The combination of record financial stimulus, COVID vaccine dissemination, and a re-opening of state level economies should breathe some life back into the US economy.  While we may see some lingering impacts through mid 2021 our expectation is that the second half of the fiscal year 2021 should start resembling a normal economy again for most industries.

Business executives should be planning ahead for the process of raising funding for expansion or for business opportunities.  Preparing a Regulation D based offering can take 30-60 days depending on the complexity of the company’s operations and the efficiency of the client in providing needed information.  While Regulation D based offerings can be executed fairly quickly and without an SEC qualification process – they do have limitations the primary one being that a 506c based offering can only be sold to accredited investors.

Regulation A+ is a fantastic vehicle for raising funding for many companies.  A company that wants to execute an offering to more closely mimics the promotion benefits of a true public offering should strongly consider Regulation A+ Tier 2 as an option.  The key with Reg A+ is “plan ahead”.  The offering preparation process and SEC qualification can typically take 5 months from start to finish so issuers investigating using Reg A+ should factor in a longer lead time to prepare such an offering for securities sales.

Questions about executing a Regulation D or Regulation A+ offering?  Call us today at (720) 586-8616.