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11. [...] This can be done in many cases without problem, including to friends and family investors. The problem is that it is riskier to do... Can this state

11. [...] This can be done in many cases without problem, including to friends and family investors. The problem is that it is riskier to do... Can this statement be qualified? Whether a private or public placement, significant risks surely exist. Beyond the specific context of Reg. D, could one be correct in stating that public placements are riskier? That said, thanks again for your always valuable contributions to this community grellas.

andrewljohnson 17y ago
He fully qualified this statement I think... just follow the logic. He's saying that if you borrow from non-accredited investors, you introduce the risk of them reclaiming their money. "Because if you think your startup is doing an exempt private placement and investors can demonstrate that it was not truly exempt, then it is an illegal offering and investors can rescind and get their money back from the issuer and from its officers and directors."
- joelhaus 17y ago
  I completely disagree. The excerpt you reference applies equally and without regard to accreditation. Just because accredited investors are the only ones involved does not mean an offering is exempt. The general conditions still apply. Let's assume the offering is exempt (probably because the issuer used grellas). My question is about whether the issuer has significantly greater ongoing compliance requirements (either contractually imposed or imposed by regulatory bodies) due to the use of accredited investors. My guess would be yes; if only because they are more competent and require greater detail in the reporting of the issuers activities. I may have minced some words earlier, but the same goes for a public vs. private offering. While the initial exemption may provide greater flexibility to the issuer, I don't see how accredited investors mean less risk. I'd think the opposite were actually true, as you would be less likely to get favorable terms unless they think you are the next Sergey and Larry. If there is a case to be made (outside of the 12 mo. cap on the allowed amount of capital raised) that non-accredited sources are riskier than accredited ones, please do share.

andrewljohnson 17y ago

He fully qualified this statement I think... just follow the logic. He's saying that if you borrow from non-accredited investors, you introduce the risk of them reclaiming their money. "Because if you think your startup is doing an exempt private placement and investors can demonstrate that it was not truly exempt, then it is an illegal offering and investors can rescind and get their money back from the issuer and from its officers and directors."

joelhaus 17y ago
I completely disagree. The excerpt you reference applies equally and without regard to accreditation. Just because accredited investors are the only ones involved does not mean an offering is exempt. The general conditions still apply. Let's assume the offering is exempt (probably because the issuer used grellas). My question is about whether the issuer has significantly greater ongoing compliance requirements (either contractually imposed or imposed by regulatory bodies) due to the use of accredited investors. My guess would be yes; if only because they are more competent and require greater detail in the reporting of the issuers activities. I may have minced some words earlier, but the same goes for a public vs. private offering. While the initial exemption may provide greater flexibility to the issuer, I don't see how accredited investors mean less risk. I'd think the opposite were actually true, as you would be less likely to get favorable terms unless they think you are the next Sergey and Larry. If there is a case to be made (outside of the 12 mo. cap on the allowed amount of capital raised) that non-accredited sources are riskier than accredited ones, please do share.