http://www.ericperkinslaw.com/index.php en eric@ericperkinslaw.com Copyright 2012 2012-02-06T02:09:03+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/insights_for_regulation_d_sponsors_from_the_2011_reisa_annual_conference/ http://www.ericperkinslaw.com/index.php/whats-new/post/insights_for_regulation_d_sponsors_from_the_2011_reisa_annual_conference/ The REISA Annual Conference offered a lot of great advice for success in the real estate syndication market.  Sponsors, due diligence officers, and other industry experts offered guidance to new sponsors looking to raise capital through Regulation D private placements.  Having worked with Reg. D sponsors for 15 years, it was good to see the industry still values the same basic “best practices” such as:  (i) sticking to your core competency (i.e., if your experience is in retail, don’t be too quick to bring an office project to market, (ii) simplicity sells (don’t get too cute or complicated with your deal structures), (iii) transparency is now more valued than ever (don’t bother trying to hide fees, relationships with affiliates, past regulatory problems), (iv) set reasonable expectations, and (v) a strong commitment to compliance and ethics.  You can request a free copy of Perkins Law’s “Top 25 Tips for Regulation D Sponsors,” on the “Contact Us” page. Real Estate Syndications 2011-10-23T01:40:34+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/dont_blame_regulation_d_for_troubles_in_the_alternative_investment_market/ http://www.ericperkinslaw.com/index.php/whats-new/post/dont_blame_regulation_d_for_troubles_in_the_alternative_investment_market/ If you believe what you read, you might come to associate Regulation D private placements with bad deals, ponzi schemes, scam artists, and unscrupulous securities brokers pushing bad investment products on innocent people.  The headlines often include a reference to Reg. D as if it was somehow an accessory to the fraud and misfortune that has resulted in the loss of billions of dollars in recent years.  But don't let those headlines fool you.  Regulation D continues to play a vital role in our economy by offering small businesses a mechanism to efficiently raise capital without having to invest a year or more of effort and hundreds of thousands of dollars in transaction costs to register a public offering with the SEC.  Regulation D had as much to do with those well-publicized investment scams and independent broker-dealer failures as El Nino.  Once the credit markets and investor confidence normalize, the Reg. D private placement market will recover and prove once again to be a driving force in the alternative investment and small business capital markets.  The Real Estate Investment Securities Association will soon release a final version of a Best Practices Guide for Regulation D offerings, and there is even some talk at the SEC of lifting the ban on general solicitation and advertising in Regulation D offerings, which has long been a murky area of law, little understood by business owners and despised by marketing and business development officers.  So don't be scared by the bad press into believing there is something inherently wrong with Reg. D private placements.  From a legal perspective, the Reg. D exemptions (especially Rule 506) are alive and well and just waiting to be used by entrepreneurs, real estate syndicators, private equity funds, and the small business community to raise capital.  Real Estate Syndications 2011-06-09T02:12:36+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/raising_the_bar_for_regulation_d_private_placements/ http://www.ericperkinslaw.com/index.php/whats-new/post/raising_the_bar_for_regulation_d_private_placements/ Companies and sponsors thinking of raising capital through a private offering should devote the time and resources necessary to understand and appreciate the importance of securities law compliance.  The private placement market has been badly bruised and beaten in recent years due to a combination of unfortunate events that led to massive investor losses, litigation, enforcement proceedings, broker-dealer closures and consolidations, negative publicity, and increased regulatory scrutiny and suspicion.  With capital still relatively scarce for many, Regulation D issuers and sponsors may be tempted to cut corners when it comes to securities compliance, but now is not the time to cut corners.  Instead, sponsors should reinforce their commitment to compliance, ethics, and best practices (such as the Real Estate Securities Association's Regulation D Best Practices Guide, which is currently under review by various industry regulators).  Admittedly, there is a lot of gray area under the law, not to mention lots of misconceptions and noncompliance in the marketplace, but those sponsors who commit themselves to "running a race to the top" and doing things the right way will be much better positioned for success when the Regulation D marketplace turns the corner.  For a quick introduction to Regulation D private placements, visit http://www.ericperkinslaw.com/images/articles/Five-Minute_Intro_to_Regulation_D_Private_Placements_revised.pdf   Real Estate Syndications 2011-04-27T13:12:12+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/sec_proposes_new_rule_501a5_accredited_investor_standard_for_high_net_worth/ http://www.ericperkinslaw.com/index.php/whats-new/post/sec_proposes_new_rule_501a5_accredited_investor_standard_for_high_net_worth/ The SEC announced a proposed rule change to Rule 501(a)(5) of Regulation D as required under Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The net worth threshhold remains at $1,000,000, but the value of the person's primary residence must now be excluded from the calculation.  For practical purposes, this change went into effect in July 2010 when Dodd-Frank became law, and what the SEC is doing now is simply fulfilling its duty under the law to update its Securities Act Rules to reflect the new standard.  The proposed rule can be accessed at: http://www.sec.gov/rules/proposed/2011/33-9177.pdf.  For those active in the Regulation D private placement industry, this change could have the following implications, among others:  (i) fewer individuals will meet the new 501(a)(5) test for accredited investor status and, therefore, fewer individuals will be eligible to invest in Regulation D private offerings open only to accredited investors; and (ii) sponsors, broker-dealers, registered representatives, and investment advisers will require more time to determine an individual investor's eligibility for accredited investor status. Real Estate Syndications 2011-01-25T20:02:27+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/financial_reform_law_tweaks_reg._d_definition_of_accredited_investor/ http://www.ericperkinslaw.com/index.php/whats-new/post/financial_reform_law_tweaks_reg._d_definition_of_accredited_investor/ The Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173) has been passed by the United States Congress and sent to the President for his signature.  Once signed into law, Regulation D sponsors and syndicators must take immediate action to update their offering documents to comply with the law's revision to the definition of "Accredited Investor," the target audience for most Regulation D private placements. In short, the revised definition of "Accredited Investor" now excludes the value of an individual's primary residence from the calculation of the $1,000,000 net worth test under Rule 501(a)(5). According to reports from the Real Estate Securities Investment Association, the SEC has indicated that this change will go into effect immediately upon President Obama’s signature of the bill. Therefore, Regulation D sponsors must take immediate action to update their offering documents, investor questionnaires, and subscription agreements to incorporate this new information.  This would apply to offerings currently in progress as well those planned for future release. Another change to Regulation D resulting from the financial reform law is to incorporate certain "bad boy" disqualifiers preventing certain issuers with a record of judgments against them from relying on Regulation D exemptions for their capital raising efforts.   Real Estate Syndications 2010-07-21T13:06:01+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/proposed_changes_to_reg._d_definition_of_accredited_investor/ http://www.ericperkinslaw.com/index.php/whats-new/post/proposed_changes_to_reg._d_definition_of_accredited_investor/ It seemed inevitable that the recent push for financial reform would reach Regulation D, the big question was how much of an impact would there be once the dust settled. At the moment, it appears Regulation D will remain intact in all material respects, with only modest revisions to the definition of "accredited investor" (interestingly, the SEC had proposed somewhat similar revisions a few years ago, but never promulgated them in final form). Here's a summary of what the latest proposed amendment does, with respect to the Reg D accredited investor definition: mandates an immediate change to the Rule 501(a) accredited investor definition for individual investors, to exclude the value of one's principal residence from the net worth threshold of $1 million; contemplates (but does not require) that the SEC may review the definition as a whole (including, presumably, the annual income requirements to adjust for inflation); and requires that there be no adjustments to any accredited investor definition that raise the net worth threshold in excess $1 million, less the value of one's principal residence, for a period of four years. Stay tuned to see what the final language in the bill looks like.  Real Estate Syndications 2010-06-05T01:17:53+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/perkins_regulation_d_compliance_article_published_in_trade_association_maga/ http://www.ericperkinslaw.com/index.php/whats-new/post/perkins_regulation_d_compliance_article_published_in_trade_association_maga/ Eric Perkins' recent article, "Update on the New Electronic SEC Form D and State Blue Sky Compliance," appears in the current issue of "FYI," the flagship periodical of the Real Estate Investment Securities Association.  For more information about REISA, visit www.reisa.org. Real Estate Syndications 2009-08-03T20:48:52+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/perkins_article_to_appear_in_national_publication/ http://www.ericperkinslaw.com/index.php/whats-new/post/perkins_article_to_appear_in_national_publication/ Eric Perkins' article on tips for becoming a successful sponsor of securitized tenant-in-common programs is scheduled to appear in the September issue of "The Practical Real Estate Lawyer" published by the American Law Institute/American Bar Association.  For more information, visit www.ali-aba.org. Real Estate Syndications 2009-07-20T01:47:18+00:00 http://www.ericperkinslaw.com/index.php/whats-new/post/virginia_blue_sky_securities_compliance_update_for_regulation_d_rule_506_pr/ http://www.ericperkinslaw.com/index.php/whats-new/post/virginia_blue_sky_securities_compliance_update_for_regulation_d_rule_506_pr/ Real estate sponsors, promoters, and other issuers of securities in Regulation D/Rule 506 private offerings should take note of two modest rule changes under the Virginia Securities Act that went into effect July 1, 2009: 1.  Form U-2 (Consent to Service of Process) is no longer required.  Because the new version of SEC Form D incorporates the same substantive elements of Form U-2, Virginia has now joined other states in dropping the Form U-2 filing requirement in connection with Rule 506 offerings. 2.  New language clarifies that the version of SEC Form D to be filed with the Virginia Division of Securities and Retail Franchising is the new version of Form D adopted by the SEC in September 2008.  Further, the document to file in Virginia is the same one “as filed” with the SEC (i.e., Form D filings with the SEC and the Commonwealth of Virginia should provide the same information). While the North American Securities Administrators Association is working on a “one stop” Form D filing platform that will allow Regulation D issuers to submit state notice filings electronically through one Web site, that is likely a long-term project.  Until then, while Form Ds must be filed with the SEC electronically via EDGAR,  state blue sky notice filings must continue to be filed by mail.  Regulation D issuers would be smart not to underestimate the importance of blue sky compliance as even a seemingly minor, technical violation of the applicable securities laws could have disastrous results.   Real Estate Syndications 2009-07-11T02:09:21+00:00