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ILLEGAL INVESTMENTS DEFINED

I have an interesting story to tell…

I got a call from a new interested investor last week. I love getting calls from new investors. It is exciting to have a chance to get one more soul out of Wall Street and into Main Street investing. Aside from baking sourdough, it is my most favorite thing.

BUT I COULD NOT ACCEPT HIS INVESTMENT!! 

Why? Because we had never met before that phone call. He found out about me and StoneCrest Equity Partners by reading my chapter in the bestselling book Persistence, Pivots, and Game Changers. (Excerpt HERE). 

As I tried to explain the rules surrounding my being able to accept investments from him, I realized I had more to teach my newsletter audience on the subject of Syndications.

It\’s important to understand that the world of investment is governed by  Security and Exchange Commission (SEC). They have very specific rules, written to protect investors. They also have specific classifications for both Investments and Investors.

But before I begin, I wanted to THANK those of you who attended our most recent Open House. The apartments are really coming along, and it was great to show them off while visiting and catch up. If you missed out, be sure to join our SEP Alliance so you get the invited to the next Built for Investment open house.

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LET US BEGIN TO PEEL THIS ONION

As you continue your investment journey it is important that you understand the different types of syndications and where you fit in as an investor. Let’s start with the most common investment types. 

Then next week we will go over how to determine your classification as an investor. 

TYPES OF SYNICATIONS

In order to raise capital without registration (becoming a fully registered company on the stock exchange) you need to have an exemption. The most common exemption for Syndications (private partnerships, group investments) are either a 506b or a 506c. We will focus on those two today.

Rule 506(b)

General Solicitation: 

• Prohibited: Companies cannot use general solicitation or advertising to market the securities. 

Investor Requirements: 

• Accredited Investors: Unlimited number. 

• Non-accredited Investors: Up to 35, but they must be sophisticated, meaning they should have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. 

• **Next week we will explain these classifications further. (If you want to geek out… Skip forward to next weeks newsletter HERE and learn about non-accredited and accredited investor classifications) 

Disclosure Requirements: 

• Non-accredited Investors: Companies must provide them with disclosure documents that are generally similar to those used in registered offerings (e.g., business plan, proforma). 

Rule 506(c)

General Solicitation: 

• Allowed: Companies can broadly solicit and advertise the offering. 

Investor Requirements: 

• Accredited Investors Only: All partners must be accredited investors. 

Verification Requirements: 

• Reasonable Steps to Verify: Companies must take reasonable steps to verify that all partners are accredited investors, which can include reviewing documentation such as W-2s, tax returns, bank and brokerage statements, credit reports, and others. 

So, since the StoneCrest Prosperity Fund is a 506b, and I did not know this gentleman prior to our first phone call last week, I could not allow him to invest. However, not all is lost. His future still can be saved. We will be converting to a 506c in the next several months and since he is accredited,  I will invite him to join then. 

This newsletter is intended to be reaching people I know through business, personal relationships and personal referrals (those count as a “prior relationship”). If this is you, should you decide to join us, there should not be an issue. 

If you found us through some alternative means, like the gentleman in my story, schedule a call so we can get to know you and thus invite you to future investments.

However, I feel it is important to mention, if you are non-accredited, the window to invest will be closed when we convert to a 506c.

Please call me if you are considering investing in our real estate fund. I will answer any question you have so you can make an informed decision. I have no desire to “sell” you an investment, only to improve your financial well-being. 

As always we are here to help you achieve more wealth with less work. Give us a call or consider joining our investment club the StoneCrest Equity Partners Alliance  where you will be the first to know about upcoming opportunities, get invited for exclusive site visits and receive even more in depth knowledge on syndications.

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This document is solely for informational purposes and does not constitute an offer to purchase a security. Securities will only be offered pursuant to a private placement memorandum in reliance on certain exemptions from the registration requirements of the Securities Act of 1933 (primarily Rule 506(b) of Regulation D and/or Section 4(a)(2) of the Act) and are not required to comply with specific disclosure requirements that apply to registrations under the Act.

Investing involves many risks, variables, and uncertainties. No representations or warranties are made that any investor will, or is likely to, attain the returns shown above since hypothetical or simulated performance is not an indicator or assurance of future results.