1 00:00:01,050 --> 00:00:02,670 Tilden Moschetti: Hi, this is Tilden Moschetti of the 2 00:00:02,670 --> 00:00:07,080 Moschetti syndication Law Group. In order to have a Reg D 3 00:00:07,110 --> 00:00:11,820 offering that's truly underneath Reg D, we need to file with the 4 00:00:11,820 --> 00:00:16,200 SEC a form that's known as Form D, we're going to go through the 5 00:00:16,200 --> 00:00:19,710 four pages of that form. Today, it's four pages long plus 6 00:00:19,710 --> 00:00:21,480 instructions. So stay tuned. 7 00:00:33,270 --> 00:00:37,545 In this video, I'm going to do something I don't think any 8 00:00:37,619 --> 00:00:42,042 attorney has ever done before, I'm going to walk you through 9 00:00:42,116 --> 00:00:46,022 step by step, the Form D that gets filed with the SEC 10 00:00:46,096 --> 00:00:50,519 ultimately lives in their EDGAR database. I don't think it's 11 00:00:50,593 --> 00:00:55,016 been done before. And so we are going to do it right now. So 12 00:00:55,090 --> 00:00:59,513 let's do it. It's helpful to have the form in front of us so 13 00:00:59,586 --> 00:01:03,714 we know exactly what we're talking about. So you can see 14 00:01:03,788 --> 00:01:07,769 here this is indeed formed the Securities and Exchange 15 00:01:07,843 --> 00:01:11,823 Commission. Item one is the issuers identity, what the 16 00:01:11,897 --> 00:01:16,320 issuer identity is, is what is that entity that's ultimately 17 00:01:16,394 --> 00:01:20,817 filing this security with the SEC. So this isn't the sponsor 18 00:01:20,890 --> 00:01:25,387 information. This is the the investment entities information. 19 00:01:25,461 --> 00:01:29,368 So it has the name of the issuer, the jurisdiction of 20 00:01:29,442 --> 00:01:33,791 incorporation. So if it's a Delaware, LLC, or a Nevada LLC, 21 00:01:33,865 --> 00:01:38,288 or wherever it is, that's the the jurisdiction that it's in. 22 00:01:38,361 --> 00:01:42,784 If it's ever been in existence before, there's some previous 23 00:01:42,858 --> 00:01:47,134 names that go here. And then here's we choose entity type, 24 00:01:47,207 --> 00:01:51,852 almost all of my clients choose LLC. Occasionally, for business 25 00:01:51,925 --> 00:01:56,717 clients, we choose a corporation that might make sense, it really 26 00:01:56,791 --> 00:01:59,960 depends on your specific situation. Year of 27 00:02:00,034 --> 00:02:04,678 incorporation, most of mine are fairly new that I file, so it's 28 00:02:04,752 --> 00:02:09,175 almost always within the last five years. And then they want 29 00:02:09,249 --> 00:02:13,745 you to put in the year that it was formed. So we do that like 30 00:02:13,819 --> 00:02:17,947 that. Then we get to the principal place of business and 31 00:02:18,021 --> 00:02:22,444 contact information. Now this most of the time is you as the 32 00:02:22,518 --> 00:02:26,867 sponsor your information, or really whoever it means to get 33 00:02:26,941 --> 00:02:31,143 in touch in contact with. So this is going to be just the 34 00:02:31,216 --> 00:02:35,787 address for notifications and a phone number. Item three, this 35 00:02:35,860 --> 00:02:40,578 is the related persons. Now this is where 99.9% of the times I'm 36 00:02:40,652 --> 00:02:44,928 looking for who's going to be the executive officer that's 37 00:02:45,001 --> 00:02:49,351 going to be involved now the executive officer could be the 38 00:02:49,424 --> 00:02:54,068 manager of an LLC, or it could be the manager of the manager of 39 00:02:54,142 --> 00:02:58,860 the LLC, it's that person who's probably the key contact the key 40 00:02:58,934 --> 00:03:03,357 decision maker, one person is identified. If you're doing it 41 00:03:03,430 --> 00:03:07,853 as part of a team, it might be there might be more than one. 42 00:03:07,927 --> 00:03:12,350 But we only need for this form one one person identified. So 43 00:03:12,424 --> 00:03:16,699 there it's just last name, first name, middle name, street 44 00:03:16,773 --> 00:03:21,344 address contact information. And almost always I use executive 45 00:03:21,417 --> 00:03:25,619 officer, though could be director or promoter in specific 46 00:03:25,693 --> 00:03:30,042 circumstances, there's never really a need in my experience 47 00:03:30,116 --> 00:03:34,318 for clarification of that responses. The item four is the 48 00:03:34,391 --> 00:03:38,741 industry group. Now this is mostly so that the SEC can keep 49 00:03:38,814 --> 00:03:43,016 track of what industries are generally using Reg D and so 50 00:03:43,090 --> 00:03:47,734 that they can get a better gauge on how to control what they're 51 00:03:47,808 --> 00:03:52,083 trying to control. So most of mine are either in this real 52 00:03:52,157 --> 00:03:56,654 estate area, either construction residential commercials down 53 00:03:56,728 --> 00:04:01,298 there, other real estate if it's land, but then a lot of times 54 00:04:01,372 --> 00:04:05,279 I'll have technology, if I'm working for a technology 55 00:04:05,352 --> 00:04:09,407 business, or in business services, I may choose that if 56 00:04:09,481 --> 00:04:13,461 it's a specific business service that's raising money, 57 00:04:13,535 --> 00:04:18,253 occasionally, but not too often. We'll use a private equity fund 58 00:04:18,327 --> 00:04:22,750 really, that's more if it truly is a private equity fund, or 59 00:04:22,823 --> 00:04:27,320 venture capital fund. We'll use those exemptions. Just to let 60 00:04:27,394 --> 00:04:31,669 the SEC that's the kind of organization it is. issuer size 61 00:04:31,743 --> 00:04:36,535 here they're looking for revenue range or the aggregate net asset 62 00:04:36,608 --> 00:04:41,105 value. Now, a lot of times you can choose and a lot of people 63 00:04:41,179 --> 00:04:45,602 do declined to disclose, I don't see necessarily a reason to 64 00:04:45,675 --> 00:04:49,582 choose declined to disclose. Certainly if I had a was 65 00:04:49,656 --> 00:04:53,637 starting a real estate syndication company for example 66 00:04:53,711 --> 00:04:58,060 or a fun, I might want to put what is revenue range or what 67 00:04:58,134 --> 00:05:02,925 the asset value ranges just as a small token of promoting myself. 68 00:05:02,999 --> 00:05:07,201 If it was a business and a small, closely held business I 69 00:05:07,274 --> 00:05:11,624 probably would always choose declined to disclose Sometimes 70 00:05:11,697 --> 00:05:16,268 there's no revenues at all. And sometimes there's no aggregate 71 00:05:16,342 --> 00:05:20,617 value, or sometimes both. So sometimes, depending on on my 72 00:05:20,691 --> 00:05:25,188 particular client, I'll choose either no revenues or declined 73 00:05:25,261 --> 00:05:29,906 to disclose. Now the exemption, so we've got several exemptions 74 00:05:29,979 --> 00:05:34,623 for rule 504. 504 is pretty out of favor at this point, I don't 75 00:05:34,697 --> 00:05:38,678 do any Rule 504 filings, I find it unnecessary and not 76 00:05:38,752 --> 00:05:43,101 applicable to really any of my clients. Really, my world is 77 00:05:43,175 --> 00:05:47,598 rule of 506b and rule 506c. Those are the two rules that are 78 00:05:47,671 --> 00:05:52,168 most used by us. And they can that's where we fill those out. 79 00:05:52,242 --> 00:05:56,812 Now over here is the Investment Company Act section, I have an 80 00:05:56,886 --> 00:06:01,383 article on my website for the Investment Company Act that can 81 00:06:01,456 --> 00:06:06,100 walk you through that, if you're doing real estate specific, it 82 00:06:06,174 --> 00:06:10,671 doesn't apply. Under 3(c)7 is an exemption that automatically 83 00:06:10,745 --> 00:06:15,168 makes it so that you are not counted in under the Investment 84 00:06:15,241 --> 00:06:19,738 Company Act. There are other rules and feel free to give us a 85 00:06:19,812 --> 00:06:24,087 call if you want to discuss the Investment Company Act and 86 00:06:24,161 --> 00:06:28,437 whether you qualify. They're most often my clients do not. 87 00:06:28,510 --> 00:06:32,786 Occasionally there is and occasionally, very occasionally, 88 00:06:32,860 --> 00:06:36,840 there will be another opportunity where there needs to 89 00:06:36,914 --> 00:06:40,895 be a filing. Under the Investment Company Act as well. 90 00:06:40,968 --> 00:06:45,023 type of filing most of my clients are doing new notice. 91 00:06:45,097 --> 00:06:49,520 But if there was a mistake or something changed, we might do 92 00:06:49,593 --> 00:06:54,164 an amendment. And then the date of first sale in this offering 93 00:06:54,237 --> 00:06:58,660 would be that first day when money exchanged hands from your 94 00:06:58,734 --> 00:07:03,231 investor to you and deposited into your bank account. Or that 95 00:07:03,305 --> 00:07:07,285 point at which that amount of money became so that you 96 00:07:07,359 --> 00:07:11,856 couldn't get it back quickly to the investor. The duration of 97 00:07:11,929 --> 00:07:16,279 the offer, generally Reg D offerings are valid for only one 98 00:07:16,352 --> 00:07:20,923 year. But if it is more than one year, you would choose no and 99 00:07:20,997 --> 00:07:25,493 you would need to make sure to stay on top of it to file. The 100 00:07:25,567 --> 00:07:29,621 renewals on that types of securities offer is equity is 101 00:07:29,695 --> 00:07:34,413 generally self explanatory. You know, it's generally an interest 102 00:07:34,487 --> 00:07:38,983 in the business itself into the assets. And so it's it's that 103 00:07:39,057 --> 00:07:43,038 ownership interest, whereas a debt may look completely 104 00:07:43,112 --> 00:07:46,797 different than equity, where it's a contract level 105 00:07:46,871 --> 00:07:51,147 relationship to the the LLC itself. And that money is owed 106 00:07:51,220 --> 00:07:55,570 back to the the investor upon certain guidelines. There are 107 00:07:55,643 --> 00:07:59,845 other more unique things like options or warrants. That's 108 00:07:59,919 --> 00:08:04,195 never really applicable to my clients. But it certainly is 109 00:08:04,268 --> 00:08:08,249 available there as well. Security to be acquired about 110 00:08:08,323 --> 00:08:12,893 exercise of the option, again, not generally used by any of my 111 00:08:12,967 --> 00:08:17,095 clients, or it's probably not used by you. Nor is pooled 112 00:08:17,169 --> 00:08:21,371 investment fund interests. Mineral property securities or 113 00:08:21,444 --> 00:08:25,572 an other tenant in common securities, I suppose could be 114 00:08:25,646 --> 00:08:29,922 slightly of use. Generally, that's not used, except in the 115 00:08:29,995 --> 00:08:34,124 rare instance where I have a 1031 Exchange being done. I 116 00:08:34,197 --> 00:08:38,473 might be doing tenant and common security in that, in that 117 00:08:38,547 --> 00:08:43,117 context. business combination transaction for contemplated for 118 00:08:43,191 --> 00:08:47,909 a merger acquisition or exchange offer is almost always a no, it 119 00:08:47,982 --> 00:08:52,332 would really be is if there was a security sale being taken 120 00:08:52,405 --> 00:08:56,607 place that was in connection with a merger acquisition or 121 00:08:56,681 --> 00:09:01,178 exchange offer, then we might say yes. On page three, now, we 122 00:09:01,251 --> 00:09:05,674 have the minimum investment amount. So almost always you say 123 00:09:05,748 --> 00:09:10,392 you set forward in your private placement memorandum, a minimum 124 00:09:10,466 --> 00:09:14,594 investment that's required from the investor. So that is 125 00:09:14,668 --> 00:09:18,796 oftentimes 25,000 50,000 100,000, sometimes even up to a 126 00:09:18,870 --> 00:09:22,777 million as the minimum investment amount. That's what 127 00:09:22,850 --> 00:09:27,421 they're looking for here. If an investor came to you and said, 128 00:09:27,494 --> 00:09:32,139 I'd like to invest, what's that minimum that you're advertising 129 00:09:32,212 --> 00:09:36,562 or not advertising but that you're putting in your PPM that 130 00:09:36,635 --> 00:09:40,763 you would accept? Sales Compensation, if you're paying a 131 00:09:40,837 --> 00:09:45,481 broker dealer to represent you, this is where that would go. If 132 00:09:45,555 --> 00:09:50,125 you were doing excuse me, if you were doing anything else, you 133 00:09:50,199 --> 00:09:54,106 would not complete sales compensation, you cannot pay 134 00:09:54,180 --> 00:09:58,529 sales compensation to a non licensed broker dealer. So this 135 00:09:58,603 --> 00:10:02,805 part you would always leave place unless you specifically 136 00:10:02,878 --> 00:10:07,301 had a broker dealer or in your transaction item 13 offerings 137 00:10:07,375 --> 00:10:08,850 and sales amount. So 138 00:10:13,380 --> 00:10:18,323 line A is really looking for the total amount of the offering. So 139 00:10:18,399 --> 00:10:22,734 if it is a $5 million, that you're raising 5 million goes 140 00:10:22,810 --> 00:10:27,373 there in line B is the total amount that's currently sold as 141 00:10:27,449 --> 00:10:32,240 of the date of this filing. By sold again, we mean those monies 142 00:10:32,316 --> 00:10:36,499 that you've received from an investor and are currently 143 00:10:36,575 --> 00:10:40,910 either in your account or already have been deployed. And 144 00:10:40,986 --> 00:10:45,626 then the total amounts to be sold is simply this line a minus 145 00:10:45,702 --> 00:10:50,113 line B gives you the total amount that remains to be done. 146 00:10:50,189 --> 00:10:53,915 Now you can have this be indefinite, and if it is 147 00:10:53,991 --> 00:10:58,478 indefinite, you would just choose this amount of indefinite 148 00:10:58,554 --> 00:11:03,041 but lying be still will have an entry, you'll still have $1 149 00:11:03,117 --> 00:11:07,528 amount there. Investors section so this is looking for the 150 00:11:07,605 --> 00:11:11,863 number of in first line is looking for if it's possible, 151 00:11:11,939 --> 00:11:16,579 that there are non accredited investors. So to you This means 152 00:11:16,655 --> 00:11:21,066 if you're doing a rule 506b offering, then you would check 153 00:11:21,142 --> 00:11:25,781 this box, and then you would put the number of non accredited 154 00:11:25,857 --> 00:11:30,192 investors who have already invested with you, you have up 155 00:11:30,268 --> 00:11:34,907 to 35 in any 90 day period, so it's probably less than 35. My 156 00:11:34,983 --> 00:11:39,698 guess is that if you put in a number that was 36, when you and 157 00:11:39,774 --> 00:11:44,338 you did this and you filed it with Edgar, I would suspect it 158 00:11:44,414 --> 00:11:48,520 would probably kick it back to you. The second line is 159 00:11:48,596 --> 00:11:53,388 regardless of whether there are non accredited investors or not 160 00:11:53,464 --> 00:11:58,255 how many investors have already invested. So this is the sum of 161 00:11:58,331 --> 00:12:03,046 accredited and non accredited investors who have invested. Now 162 00:12:03,122 --> 00:12:07,686 obviously, if it's a rule 506c, this is the only part you're 163 00:12:07,762 --> 00:12:12,249 filling out, it's just the number of investors. Law line 15 164 00:12:12,325 --> 00:12:16,888 Is sales commissions and finder fees much like up here sales 165 00:12:16,964 --> 00:12:21,679 compensation, you're going to leave this blank unless there is 166 00:12:21,755 --> 00:12:26,470 a broker dealer involved. Now I know it's very tempting to see 167 00:12:26,546 --> 00:12:31,262 this line here and say finders fees. Okay, so that means I can 168 00:12:31,338 --> 00:12:36,053 pay finders fees, the fastest way to get in trouble here is to 169 00:12:36,129 --> 00:12:40,920 pay finders fees, the rules are very, very strict on the use of 170 00:12:40,996 --> 00:12:45,483 finders, and I would highly recommend that you just not use 171 00:12:45,559 --> 00:12:49,894 them at all, the fastest way for a house of cards to come 172 00:12:49,970 --> 00:12:54,762 tumbling down is for somebody to use finders have an issue come 173 00:12:54,838 --> 00:12:58,640 up with one investor and the investor say to their 174 00:12:58,716 --> 00:13:03,279 plaintiff's attorney, I've got this guy told me to invest in 175 00:13:03,355 --> 00:13:07,843 this, it was really great, and then it all fell apart, this 176 00:13:07,919 --> 00:13:12,558 will kill you, I would not spend my time at all using finers. 177 00:13:12,634 --> 00:13:17,425 Item 16 use of proceeds, this is really the amount that's being 178 00:13:17,501 --> 00:13:22,140 used to pay you. And this is the amount that's being paid you 179 00:13:22,216 --> 00:13:27,008 typically as like an acquisition fee, or as a marketing fee. So 180 00:13:27,084 --> 00:13:31,875 it is used for payments to these persons in risk. That is being 181 00:13:31,951 --> 00:13:36,666 used, right. So and that is to market the security or so a lot 182 00:13:36,742 --> 00:13:41,153 of times that will also be counted as the acquisition fee. 183 00:13:41,229 --> 00:13:45,564 So I would put always put the amount that's there. If you 184 00:13:45,640 --> 00:13:50,356 don't know, if you've already read if you're starting to raise 185 00:13:50,432 --> 00:13:54,767 the money, and it's a 1% acquisition fee, then you may be 186 00:13:54,843 --> 00:13:59,406 choosing an estimate based on what it is. And that's totally 187 00:13:59,482 --> 00:14:04,121 acceptable. The last section really is for signing the form d 188 00:14:04,197 --> 00:14:09,064 and that is we again, we put the name of the issuer, the name of 189 00:14:09,140 --> 00:14:14,084 the signer, the signature of the person signing, and their title. 190 00:14:14,160 --> 00:14:18,799 If you are doing it yourself and you marked in the box as you 191 00:14:18,875 --> 00:14:23,286 were the executive officer, I would always put as that you 192 00:14:23,362 --> 00:14:28,077 were the executive officer here and have you sign it. And that 193 00:14:28,153 --> 00:14:32,564 is the end of the majority of the forms for Form D. Now on 194 00:14:32,640 --> 00:14:36,443 pages five, we have instructions. Six we have more 195 00:14:36,519 --> 00:14:41,386 instructions. Seven we have more instructions. And now we get to 196 00:14:41,462 --> 00:14:46,102 pages eight through these are continuation pages. They do not 197 00:14:46,178 --> 00:14:50,741 need to be filed if they're not applicable if you've already 198 00:14:50,817 --> 00:14:55,228 answered everything. So if there's multiple issuers, which 199 00:14:55,304 --> 00:14:59,791 sometimes there is we need to fill out these pages as well. 200 00:14:59,867 --> 00:15:04,126 And then also If there are multiple related persons that 201 00:15:04,202 --> 00:15:08,917 you're reporting, they would go here on page nine. And then if 202 00:15:08,993 --> 00:15:13,480 there were multiple people paying sales compensation, which 203 00:15:13,556 --> 00:15:18,119 I think I've beaten now that I would not recommend it unless 204 00:15:18,196 --> 00:15:22,911 you have a broker dealer, then I then this page would be used. 205 00:15:22,987 --> 00:15:27,626 And then signatures go here on page 11. I hope that you found 206 00:15:27,702 --> 00:15:32,113 that helpful to walk through form D give you an idea about 207 00:15:32,189 --> 00:15:36,676 what to expect when you're filing it. Now it all gets filed 208 00:15:36,752 --> 00:15:41,087 with the SEC on the EDGAR database using your own issuers 209 00:15:41,163 --> 00:15:45,802 see ik, for more information about what that means and how to 210 00:15:45,878 --> 00:15:50,442 get this done. If you need help getting it done, my law firm 211 00:15:50,518 --> 00:15:55,233 will certainly be happy to help you. We represent people doing 212 00:15:55,309 --> 00:15:59,796 offerings under Regulation D rule 506b and 506c that is all 213 00:15:59,872 --> 00:16:03,979 we do is work on Reg D offerings, so feel free to give 214 00:16:04,055 --> 00:16:08,010 us a call or visit our website for more information.