Tilden Moschetti: is the project that you're working on right
now? A syndication are a fun meaning it's a security, or is
it a joint venture, we're going to look at the differences
between the two and help you decide which category you're in.
My name is Tilden Moschetti. I'm a syndication attorney with the
Moschetti syndication Law Group, your project that you're working
on right now or that you're thinking about working on right
now, it's important to decide if it is a security, or if it's a
joint venture, it's a fork in the road, and whichever one it
is, is going to dictate some of the rules on which way you go
forward. So let's talk about what a security is. First, a
security is most well defined in a very important Supreme Court
case, that it's the case of us, versus Howey. Or I'm sorry, sec
vs Howey. In that case, what was decided was a security is
whenever there is a offering, or that is basically a collection
of money, with the purpose of making more money, and relying
on the services of a third person in order to make that
money. So that's what a security is. So for example, if you were
to put together a real estate syndication, where you are
getting investors into it, and asking investors to come in, and
your investors are taking a passive role. So you're doing
the work of putting the deal together and doing the asset
management, and your investors are just giving you money, and
maybe voting on a few minor things. But you are the main
decision maker, that is a security because they're relying
on you, in order to make the money in the project. A good
example of a project that wouldn't be a security might be
something like a charity. So people coming together for a
common purpose to build a building, perhaps. But the
purpose is not to make money, it's to do it for a church or to
do it for a boys club, or whatever it is, that may not be
a security, it might be because it wouldn't be for the purposes
of making money. In this context, when we're comparing
and contrasting with a with a joint venture, the difference
here would be if it's a security, it would be back
coming together for a third party. Now, if you and Team A
and Team B, we're coming together in order to pool funds,
and build a building perhaps. But you all are like integrated
integrally related. So you're doing all the finance work,
you're making sure that the deal comes together, you're making
sure that the rents get paid all those sorts of things. And Team
A, they're doing all of the marketing work and talking to
investors and doing those sorts of things. And TMC is doing the
actual construction, and it's doing this and it's doing that
that's coming together. But you're not none of you is
relying on the services purely of a third person, none of us
pass up, you're all very active. In that situation. It's a joint
venture. Now, the difference here is important because if
it's a security, then you follows under security's rules.
If it's a security, it must either be registered with the
SEC, or fall under one of the exemptions, most importantly,
Regulation D, which is what my firm practices law with. If it's
a joint venture, it is not a security, but you will need to
do a joint venture agreement. Now most of the time, those
joint venture agreements will take place outside of the
securities context. For example, my firm doesn't work on joint
venture agreements. We can talk with you about a joint venture
if it's in relationship to an actual security offering as
well. But if it's just you guys working together and working as
a as a team collectively, to make this venture go forward and
make money from that. It's not part of securities, it probably
falls under local laws as well. So you have to you would be well
advised to speak with a local attorney to make sure that it's
drafted in such a way that it's protecting all of your interests
and negotiated appropriately. So that's the difference. If it's a
security we're talking essay See registration or exemption, such
as Regulation D, if it's a joint venture, it's probably falls
under local law is not a security, but you'll want a good
joint venture agreement so everybody knows what their roles
and responsibilities are. I hope that helps. My name is Tilden
Moschetti. I'm a syndication attorney with the Moschetti
syndication Law Group. If we can help you put together a Reg D
offering, we'd be happy to talk with you and see what we can do
together.