Buckle Up this is gonna be a fast course in how and what you can do superficially when raising money as a new Fund and some basic level rules. You are not gonna want to miss this.

Investment Funds Regulations SEC Regulation D

The one thing you must know about a Regulation D filing is you as a Investment Fund Manager can Fundraise “UNLIMITED” amounts of money.

It’s likely most Business Entrepreneurs won’t understand the difference between a Regulation A vs. Regulation D? Well to put things into basic perspective Cardone Capital is a Real Estate Fund that is Regulation A, and he has a Fund that is a Reg D 506(C). Typically Regulation A Funds are generally geared to Crowdfunding. Meaning you can advertise, do all the online marketing to attract non accredited and other qualified investors to your fund.

Did you catch my latest article “How to stay safe when Entrepreneurs when Investors Invest?“

Back to Reg D Funds.

But unlike Reg D funds? Reg A funds need to have all the legal documents Paperwork and more set up and prepared before opening the fund to investors.

Public Companies have quarterly and yearly statements, yearly audits, and lots of transparency because the SEC requires a level of public scrutinization that Reg D 506(b) and Reg D 506(c) funds do not.

SEC Regulation D 506(B) Investment Fund

Here are some basics that need to be accounted for, under Regulation D 506(b)? This allows a new Fund to accept investments from an unlimited number of Accredited Investors and 35 non-accredited investors. (SIDE NOTE) Say you are going to accept investments from non-accredited investors this will be a ton of additional work. If you remember from other sections? A person who meets SEC guidelines of Accredited investor has a net worth of 1 million dollars or make at lease 250,000 a year income. If you accept Non Accredited Investors there is more disclosures. Most of the SEC guidelines and Federal Laws are written to protect the little guy who does not make over 250,000 a year and is not Financially Sophisticated enough to negotiate risk averse actions of Investments. So the Securities and Exchange Commission does require Investment Fund Manager and Professionals to know who your Investors are.

Usually its generally accepted by Financial Investment Fund Managers and Entrepreneurs that not accepting non accredited investors to invest in your new fund is easier for the new Fund Managers who are building their first fund. If you do accept non accredited investors? There will be more paperwork, statements, and you must over disclose to make sure the Non Accredited investor understand what they are getting themselves into.

Details of a Reg D 506(b)

If you are fundraising for a Regulation D 506(b) Fund? The accredited Investor must self verify themselves by checking a box on the forms provided. Declaring they are indeed a Accredited Investor. However for a Reg D 506(c) fund? The Fund accredited investor must provide a letter from a Financial Advisor, Accountant or Attorney, or some sort of proof they are indeed an Accredited Investor. But on a Reg D 506(b) they only need to “self verify” they are indeed a accredited investor. But what if they fudge or lie on the form? Yes they absolutely could. But you should be covered. The investor has verified they are sophisticated enough and understand the rules of investing in your 506(b) fund.

So how does a Reg D 506(b) Fund manager acquire investors? Well it’s important first to share that if you do in fact begin fundraising money for a 506(b) Investment Fund? According to SEC Guidelines and Mandates you are “NOT” allowed to mass advertise to attract and acquire clients. This is why you never see the Top firms in Private Equity publicly advertising for business.

This is important to point out. There is a difference for a Regulation D 506(c) Investment Fund? You can Advertise for a Regulation D 506(c) Investment Fund to Attract Accredited Investors ONLY.

RAISING CAPITAL FOR BOTH REG D 506(B) and 506(C) FUNDS

• You will need to File your FORM D with the SEC. (15days after receiving a Check from a Investor)
• Your Form D should be filled by your Securities Attorney – NO EXCEPTIONS
• You are allowed to Raise Unlimited amounts of Funds for both Red D – 506 Funds
• You must follow and file with the State as well
• 506(C) Funds Managers need to Verify the Investor is an Accredited Investor by w2 or Tax docs.
• 506(C) Funds Managers are allowed under SEC Guidelines to Mass Advertise
• 506(B) Funds are not allowed to advertise. Your only allowed word of mouth referrals. And allowed to accept individuals who are personally already known to you. No Exceptions.

SEC Government Website Form D Link (CLICK)

Kansas Insurance Agency Forms for Investment Funds and Professionals (CLICK HERE)

However for Reg D 506(B) and 506(c) Investment Funds Fund managers are required by SEC guidelines to only pitch investment fund opportunities to individuals they already have met. So the next time your at the country club and a Dentist begins chatting me up as a Entrepreneur and learns I am starting a Fund? I am not allowed to pitch the Dentist this first time meeting. The rules are strict. But that is how this world works.

Regulation A Investment Funds

This article is not about SEC Regulation A Investment Funds. However I would like to expand just a bit more on this interesting topic. One of the downsides of REG A Funds is you must have them Filed and prepared before going out into the market to raise funds for this type of Fund. This includes your Attorneys and your all the accounting prep and much more. And honestly if your a Entrepreneur that can be simply out of reach. Plus the transparency is much more strict. Meaning you will need to have reports publicly published every quarter or more to Investors and the Public.

With Reg A Investment Funds you are allowed to Advertise on a Mass Scale to attract Investment Capital LP’s. This is good for the person who does not make 250,000 a year and for those who are not sophisticated enough to leverage having nearly no experience with risk in Investing. The SEC does want to protect Grandma or John who do not have a net worth over 1 million dollars.

In closing? I would love to take the time to share a Big and warm Thank you to my buddies in Utah for always hooking me up and putting me on the right path. And to the rest of you? I genuinely hope you leave with a better understanding and some guidance about SEC Reg D 506(B) and Reg D 506(C) Investment funds.

Keep checking back soon enough I am learning just a ton on my journey and I hope to share a small piece with others out there who would love to know more. If you are a Executive who wants to take the next step of starting a fund and learn how I have been so successful making headway in Financial Circles? And want to know how you can fundraise easily and smoothly? Please Email me below for a few hours of One on One Coaching. Click the Button.

Godspeed to you all! And I will catch you later.

JS