Tilden Moschetti: Regulation D rule 506b and 506c involves us
indicator finding investors. Now when it comes to finding
investors, either we're pulling them from our own internal
network, or we're finding them outside. Now one of the ways we
can do that is to make sure that those people within our network
and those people outside hear our message. And we do that
through a solicitation. But what is a general solicitation? And
what does that mean in this modern day and age? That's what
we're going to go through today.
My name is Tilden Moschetti. I am a syndication attorney with
the Moschetti syndication Law Group. We're talking about
general solicitation today, we're actually going to narrow
it down a little bit more, because we have one question
that comes up in my office all the time. And that is, how
social media could possibly fit into this context. Now, to put
this into its proper frame, I think it's important for us to
look at the rule itself, of what constitutes a general
solicitation. Now in the code itself, it's under Reg D rule
502, where they actually describe it, and they don't call
it general solicitation there, they call it the manner of
offering the limitation on the manner of offering what helps
describe it. And that limitation applies directly to rule 506b.
Because remember, under 506c, we can make a general solicitation,
well, you can put a billboard up on Main Street, we can do
whatever, but 506b, we have a limitation on offerings. So what
exactly does the SEC tell us what that means? What is a
general solicitation? Well, here's what you can't do. First
there is, what we can't do is we can't have a seminar where the
whole purpose of it is just to market the offer. So that's
502c(2) that describes it. But Rule 502c(1) one actually
describes a little bit better and starts to get on what we're
talking about today. And so it says, And they meet any
advertisement, Article notice or communication published in any
newspaper, magazine, or similar media or broadcast over
television or radio? Oh my goodness, do these people live
under a bridge? Or what? Because that needs to be severely
upgraded. Newspapers? What are those magazines? I've heard of
them? They mean, like those digital magazines talking about?
What about social media? And that's a question that I get all
the time. So the argument could be made, and I think not
correctly. And we'll go through why in a minute. That? Well,
when I add when I post something on Facebook, I'm posting just to
my network itself. So those people who already know me,
right, so those people who already know me, they can know
that I'm doing it, and it's not a general solicitation, it
doesn't really fit in to what they were talking about under
Rule 502c1. However, the difference is the substantive
ness of that relationship with those people that you have on
Facebook. I mean, my Facebook account has many, many
followers. And the reality is, I probably know 100 of them.
There's probably 400, 500, 600 people who have liked my page,
and I've accepted their friend requests. And I don't actually
know them. Now on LinkedIn, that's also very common. So
these are be friends, friends of friends, friends, of friends, of
friends of friends and friends of friends or friends or
friends, or people who just sent me advertising and we're in
similar industries. And so I add them. That is the case and the
SEC knows it, and the courts know it. So when it comes to
actually making a solicitation, if I were to post about my Rule
506b offering, hey, come look at this that I'm offering. Come
invest with me now. I'm making a general solicitation because
it's going out to people who really aren't part of my
internal network. So it is taking advantage of that similar
media broadcast, right. So I'm broadcasting it out over the
wide spectrum. So social media itself needs to be very careful
when you've got a 506b offering. Now, certainly I could probably
say something like, Hey, I'm a hey, I'm going I am going to be
invest stick into XYZ and not make anything about investors or
come invest with me or anything else. Or, Hey, I've been doing a
lot of work in real estate or securities or private equity or
crypto mining or whatever it is that you're doing. I'd love to
talk to all of you about it. And then as part of those
conversations, not pitch them immediately unless it happens to
be somebody you actually already have that substantive
relationship with. But then you can take that conversation
offline, you have a conversation in general about those, you wait
a period of time and you reintroduce it, we have other
videos that talk about exactly that process. And you can find
them on my channel. Where the key takeaway here is this when
you're selling securities, which involves the sale of stocks,
bonds, mutual funds, real estate, and the sort of interest
where somebody has a passive role, you as a syndicator must
comply with the securities law, obviously. Now, syndicators can
choose to register with the SEC, or you can find an exemption, or
you can risk being considered an illegal activity. Exemptions
like Reg D Rule 506b, and 506c, are very popular and useful. And
it's what my law firm specializes in. And they provide
a certainty and save time and money. But here's the main key
takeaway. Social media advertising is a major concern
for you. It can impact the exemption 's use, and it can
require an enormous amount of penalties, which you don't want
to hit if it's been used. So treat social media as if it is
really media, the emphasis in that term, as it would be looked
at by the SEC or court is media which means general solicitation
almost always. So use it with caution. If you've got a 506b
offering, do not talk about your your offering in any sort of
specific terms or that there's even a possibility of investing
with you, because that will be eventually used against you,
either in this offering or in some offering that you make down
the road. My name is Tilden Moschetti. I am a real estate
syndication attorney with Moschetti syndication Law Group.
And if we can help you do your own syndication with by
providing you the documents and the assistance you need to make
yourself successful, we would be happy to help you