SEC Advisory

Syndication Attorney, Amy Wan warns about some of the issues that have been going on with other deals out there that investors should be aware of. 

This is why I only work with people with: 
1) proven track record 
2) people I Like & Trust

In order to avoid the below issues I have avoided larger deals with partners I don’t know.

People in the Passive Investor Accelerator & Mastermind always bring over deals and this is the reason I always as “who the heck is this person? Do you know them?”

This is why you see me doing smaller deals that although they are not spectacular 300+ unit deals it is something that I and a small tight-knitted group can qualify for the debt ourselves and organically raise the money ourselves which… 

1) eliminates the need for artificial dead weight and liability in our GP and deal (risk for even LPs) and 

2) we don’t have to give a celebrity GP a large portion of the deal which allows us to be fairly compensated as GP’s and do generous 85/15 LP/GP splits and under 1-2% acquisition fee deals

If this is totally foreign to you do not hesitate to contact me or setup a call if you are currently a Hui Deal Pipeline Club Live investor.


Advisory from Syndication Attorney, Amy Wan

“What I’m about to say, I say with no judgment. I write not with the intent to point fingers, but because I know many of you have families that you love and cherish. I want you all to be able to be present with your families and be able to fall asleep at night, instead of putting your families through several years of expensive, anxiety-inducing lawsuits, SEC proceedings, and financial stress.

Something odd has been happening in the real estate syndication industry over the past few years. There is a new breed of sponsors that call themselves “capital raisers”–many of whom are violating securities laws because they’re being paid transaction-based compensation, despite not having a broker-dealer license from FINRA. Capital raisers seem to be coming up with all kinds of creative “loopholes” around broker-dealer laws that just don’t hold up.

Over the past few months, I’ve seen or heard about the following suspect practices

  • Capital raisers getting paid from acquisition or asset management fees
  • Deals with over a dozen individuals in the sponsor team
  • “Deferred equity structures” where a capital raiser is rewarded with a slice of the management or sponsor entity depending on how much is raised
  • Capital raisers claiming to be “part of the General Partnership” when they’re not mentioned anywhere in the PPM or Investor Summary/Deck
  • Investors being presented with the same deal from multiple different people claiming to be part of the Sponsor

If you are considering any of the above, or considering bringing in a ‘capital raiser’ to be a part of the sponsor team, I recommend you reconsider.

If you want to know more about why many capital raisers are raising funds illegally, I explain the legal basis in more detail in this article.”


And more on 20.03.4:

Client Alert: Recent Real Estate Syndication SEC Actions

DISCLAIMER: The following is not legal advice and does not create attorney-client privilege. It’s purpose is to educate you on newsworthy events. You are advised to contact an attorney for legal advice.

Dear Clients and Friends,

Last week, we received several calls and emails from concerned syndicators regarding SEC letters and subpoenas recently sent to several prominent syndicators.

The subpoenas surround an investigation around one specific company and several related persons and companies related to that company. Passive investors in certain deals relating to the syndicators have also received letters asking that the investor preserve evidence and refrain from deleting or destroying certain materials.

Although the SEC is vague in its communications, we believe the main issue in the investigation appears, at this time, to be the “co-GP” or “capital raiser” issue—i.e., the compensation and inclusion of third parties into the sponsor or management group (or GP). Previously, some syndicators believed that merely including a third party into the management group whose sole purpose or job was to raise capital would not require broker-dealer licensure under the “issuer exemption.”

While this initial investigation is limited so a few specific parties, we do believe that the SEC investigation may lead to further enforcement against additional parties based on widespread practices we’ve been seeing in the real estate industry.


Syndicators (generally): We’ve been told by many over the past several months that “everyone else is raising capital this way and I haven’t heard of anyone getting in trouble.” Well, this is our heads up to you that people are now potentially in trouble. So please heed the warning—don’t use third party capital raisers, limit the number of folks involved in your syndication, and make sure that EVERYONE in your sponsor group has legitimate, on-going roles in the syndicator other than raising capital, investor relations, and due diligence.

If this issue sounds new to you, you can read our previous client advisory on this topic here. We also recorded a Q&A session on this issue with the former Western Regional Director of FINRA (the agency that regulates broker dealers) here.

If none of this applies to you, then keep calm and carry on. You’re doing great 😊

Syndicators who have received a subpoena (none of our clients, since we’d never let you): If you know a syndicator who has receive a subpoena, you should tell them to lawyer up immediately. Friends don’t let friends respond, communicate, or contact the SEC without having a lawyer. Once your friend has a lawyer, the SEC knows that it must communicate with your friend through that lawyer. Your friend also should not hire any regular lawyer—they should hire someone who specializes in defending against SEC enforcement actions and does this on a daily basis. Bonus points if this person was formerly a regulator. While our firm does not do this, we know folks who do, and are happy to give referrals.

Passive investors (generally): One question we’ve gotten is whether its still safe to invest with the parties under investigation. Well, that’s up to you. You should know going into any future deals that these syndicators may be spending a lot of time and resources dealing with the investigation for the foreseeable future. Additionally, they MUST disclose in their offerings that they are under investigation. Basically there’s going to be a lot of extra trouble due to legal risks.

In terms of what happens from here on out (and what options are available to you), you must remember that you invested in private securities, so these securities are not publicly tradable and hence are generally illiquid. If you want to exit the deal, you could attempt to sell them via a secondary transaction, but know that 1) you can only sell these 12 months after investing, 2) you would need to disclose the investigation to the buyer, 3) it’ll cost a significant amount of money to do the legal paperwork that transfers the securities (and you need to consult the original offering documents to see if it’s even allows), and 4) it will likely be at a discount.

It’s hard to say where to go from here because there are a lot of pieces in play. The SEC could do nothing or could merely order that any compensation received by capital raisers be given up. They could also go further and order rescission (the return of capital) to investors, amongst a number of other remedies. State regulators may feel inclined to get involved. Co-investors could file a civil suit (which may end up with investors footing the legal defense bill depending on the indemnification clause in the offering documents).

Passive Investors who have received letters: You should follow the instructions on the letter. We have also gotten questions about whether it’s a good idea to call the SEC, since they invite you to communicate with them. In general, it is never a good idea to talk to any law enforcement without an attorney.


Advisory from Mauricio Rauld
Premier Law Group

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Its Official…THIS has become an Epidemic.

Earlier this week, I did an interview with James Eng, Senior Director of Old Capital Lending. James and I were doing a little promotion for his Old Capital’s national convention next month in Dallas, where I will be speaking about an epidemic that has hit the syndication community.

More than any other issue out there, this one issue is the one I believe will really bring some Syndicators down whenever they start having problems with their deals, most likely caused by the next correction, whenever that happens.

The epidemic is simply this: bringing in people into the syndication as pure “equity raisers.”

In the old days (and by old days, I mean 2-3 years ago) it was common to see single syndicators or at most 2 syndicators. After all, most syndications can easily be done by 2 people and when you add more and more, you are watering down your returns as a sponsor.

Even when more than 2, these syndicators had been business partners for many years and had done multiple deals together.

However, over the past few years, we have seen the emergence of “money raisers” who’s sole or primary role is to simply raise money. They go from deal to deal, offering to raise money in exchange for a “piece of the pie.”

Well…. Here are the 5 things you must remember when you are thinking of bringing someone into your syndication team who has the ability to raise a lot of money for your deal.

1. You CAN NOT compensate someone for raising money, unless that person is an SEC licensed Broker/Dealer. Compensation is not just cash. It includes ANY type of compensation whether shares in the GP, sharing of fees or profits or old fashion cash.

2. If you are paying someone based on how much money they are bringing into the deal (ie: transaction-based compensation), you are dead in the water. Game over. End of story. Period!

3. Even if you are not paying someone transaction based compensation, this doesn’t mean you are good. It simply means you are allowed to proceed to the next level of analysis and look at the ‘Facts and Circumstances’ of your particular case.

4. You still can’t directly compensate people for raising money (even if not tied to the amount they raise). So giving Johnny 10% of the GP in exchange for simply bringing in money is still a no-no.

5. They must be legitimate co-sponsors in the deal so they can rely on what we call the “Issuer exemption” and rules that revolve around it. In order to comply here, the co-Sponsor must be doing “substantial” work and the “primary” responsibility must be something OTHER than raising money.

If a regulator were to ask you “What did Johnny do in exchange for their 10% GP interest”, you answer can not be “He helped me raise money”. You must prove to the regulator (and it is YOUR burden) that Johnny was compensated for something else and that needs to make sense.

If you want to see the video I did this a few months ago (which has been viewed over 1,000 times), then check it out here. Hope