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SEC Questions Answered – Part 1

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Article by Alan Cowgill

Every now and then, I have students ask me if my home study system is compatible with SEC regulations…

Yes, it is compatible.

I realized, for the benefit of my students, I needed to address these folks concerns.

While speaking all over the nation, meeting thousands of real estate investors the past couple of years and getting ask these same SEC questions, I realized that there is a lot of confusion concerning SEC regulations Vs private lending.

The confusion seems to arise because of the following:

  1. Each state establishes their own regulations and exemptions. Therefore there are different guidelines depending on where you live.
  2. If you cross state lines with your private lending, i.e. houses in one state and lenders in another, the Federal SEC regulations come into play.
  3. There are a lot of half truths floating around and when people hear these, they get confused and possibly fearful.

To be better equipped to answer everyone’s questions, I decided to hire and attorney to do some research. Since each state is able to establish their own regulations, I decided to have the attorney start his research with the state of Ohio.

Some highlights while working with my attorney:

  1. In Ohio I can acquire up to 9 private lenders without having to file any paperwork with the state. Once I file the proper paperwork my number of lenders is unlimited. Different States have different numbers and most are higher than Ohio.
  2. As long as my properties and lenders are in Ohio. Just the state regulations apply. If I have lenders and or houses in different states then the federal SEC regulations apply.
  3. If I go over 9 lenders, the paperwork I need to file with the state is very simple.
  4. I need to give a disclosure statement to potential lenders.
  5. Can’t pool lender money but I can if I file the proper paperwork.
  6. Can’t use the word ‘guarantee’ in my advertising.

As a side note, some of you are under the impression that the SEC is out to cause you problems. The SEC is not the bad guy; they are looking for the bad guys. They want legitimate business owners to prosper. They are very willing to help you if you just ask. They just want you to comply with their regulations.

Alan Cowgill is a speaker, author, and real estate entrepreneur. Alan has bought or sold over 200 investment properties. Alan Cowgill is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.

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