Revamped Securities Exemption Could Be Useful for Syndicators

Despo and Harter write that companies have been leveraging Reg A+ to raise millions of dollars from unaccredited investors.

NEWARK, NJ—To raise funds for projects in all sectors of commercial real estate, syndicators continue to rely heavily on Rule 506 of Regulation D (“Reg D”) of the Securities Act. This is only natural: As a private placement exemption, Reg D offers substantial advantages. Syndicators, for example, can advertise and raise an unlimited amount of capital even as they avoid the headaches associated with both state and federal securities registration and oversight.

However, there are some restrictions here: The investors investing in the offering must be accredited—a high-net-worth individual, a bank, a savings and loan association, a preexisting business partnership with assets in excess of $5 million, etc.—as defined by Rule 501 of Reg. D.