Private Lender SEC Compliance

Introduction
In early 2002, I started a serious effort in bringing private money into my life so I
could build my real estate business. I had acquired two private lenders prior to
2002 but after finding them, I procrastinated for four years. In 2002, I began to
aggressively seek them out.
While teaching what I had learned about private lenders to other real estate
investors, I started to get questions about SEC regulations and compliance.
Im not an attorney nor can I provide legal advice so I hired an attorney to
research this issue for me so I could understand it and provide my students with
accurate, concise information on this topic.
This booklet is the result of my attorneys efforts.
The booklet is not intended to be legal advice, but just to provide information to
real estate investors on the SEC compliance regulation. You will need to seek
your own SEC attorney to get the legal advice you require.
It is my sincere wish that you will find this work extremely beneficial in growing
your business.
E. Alan Cowgill
Copyright 2005 2011. All rights reserved. This document is confidential and proprietary to Colby Properties, LLC, and cannot be
used, disclosed, or duplicated without the prior written consent from Colby Properties, LLC. This is an unpublished work protected by
US federal copyright laws and no unauthorized copying, adaptation, distribution, or display is permitted. Rev I.
Disclaimer
This publication is intended to deliver accurate and authoritative information in
regard to the subject matters covered. The information it contains is up-to-date
as of the date of its publication. By accepting this material, you recognize that the
publisher is not engaged in offering or providing legal, accounting, or other
professional services. Students should feel free to consult legal, accounting, or
other professional advisers.
Further, this is not a sale, nor an offer to sell, securities, nor an invitation for the
offer to purchase securities, the sale of which is regulated by state and federal
laws and regulations. Any sale of securities must be conducted by registration or
under an exemption from registration. Reproduction or translation of this work or
any part of this work, without the permission of the copyright owner, is unlawful.
When offering securities, choose and use an appropriate exemption or filing and
make sure to comply with the relevant laws and regulations covering the
exemption or filing. These laws and regulations cover how you offer the
securities, to who you offer them, what you disclose to them about the
investment opportunity and risks, when and how you may advertise, and many
other important issues. Consult appropriate professionals, such as attorneys and
accountants, for further assistance.
Copyright Notice
Copyright 20052011, Colby Properties, LLC. All rights reserved. These
materials are delivered under a limited license to the original lessee, who is
authorized to use all materials contained herein for personal use only. These are
copyrighted consulting materials and are not intended to offer legal, accounting,
or other professional advice. The licensee is responsible for the use of these
materials.
Any unauthorized transfer, duplication, copying, sale, or other use of these
materials other than to the original lessee is prohibited. Published by and
copyright of Colby Properties, LLC.
2071 N Bechtle Ave, PMB 310

Springfield, Ohio 45504
Booklet Overview
Terms Defined
Private Lending Newsletter with an SEC Overview
Compliance Flow Chart
11
Questions Answered
- What Exemptions Can I Use
- Ohios 3H Exemption
- Frequently Asked Questions
12
Disclosures
- What is a Disclosure Document
- Typical Disclosure (long form)
- Whats the SCOR
Disclaimers
- Advertising Disclaimer (short & long)
- Website Disclaimer (fill in the blank)
Doing Business across State Lines
- Form D (Federal)
- What are Accredited Investors
- What is a Public Offering
- NASAA Member List
Booklet Summary
12
16
17
19
19
22
31
32
32
33
35
36
47
48
50
58
Booklet Overview
The following are highlights for real estate investors on the Federal and State
SEC compliance guidelines contained in this booklet:
1. Borrowing money from private individuals to fund real estate deals is legal
and exempt from certain types of securities transaction.
2. Each state has the authority to set their own securities guidelines, laws, and
regulations. Therefore the regulations vary from state to state. Each will call
themselves The Division of the SEC. So in Ohio, it is The Ohio Division of
the SEC.
3. Each state establishes its own threshold on the number of private lenders you
can have before youll need to fill out some paperwork (register) with the
state.
4. Important: The average real estate investor doesnt typically have to
register, as long as they are below their states threshold. (See Ohios 3H
exemption explained in this booklet.) There are thirteen states where real
estate investors do need to notify their states Division of the SEC office prior
to securing their first private lender.
5. Advertising Guidelines:
- In all states you will need to register before you can start advertising.
-
Advertising guidelines to find private lenders vary by state.
There are different types of advertising, so you need to check out how
your state treats each type you are considering using.
Once you register with the state, it should be okay to advertise, as part
of complying with each states laws, rules, and regulations.
You cannot use the words Low Risk or Guarantee in your

advertising in any state.
6. Even though private lending is exempt that doesnt mean that you never
need to register with your state. At some level (threshold) you will need to turn
in some paperwork (register), so they will know what you are doing.
Note: We used the state of Ohio as a typical state for example purposes.
Terms Defined
Register: To file paperwork with your state Division of the SEC, and/or the
federal SEC, allowing you to offer your promissory notes to private lenders. To
register means to file a form or forms, along with proposed advertising materials,
a disclosure document, and other supporting materials, along with a filing fee.
Registration by Description: A type of filing with the states Division of the SEC
that allows for offering promissory notes to private lenders. For example, in Ohio,
any such filing for an offering that would raise $250,000 or more requires a filing
along with a copy of a disclosure document. The states Division of the SEC
would review the filing for substance and disclosure of key risks and the business
model. This is not a full merit review, meaning this is a filing with somewhat less
scrutiny than other registration types.
Exempt: Meaning that the securities involved or the securities transactions
involved do not require a registration with the states Division of the SEC. Many
exempt securities and transactions are self-executing, meaning that no filing at
all needs to be done. Other exempt securities and transactions only require a
minimal notice filing with the states Division of the SEC, meaning a short form is
filed with the Division, sometimes with a filing fee.
Exempt offering: Meaning that the securities involved or the securities
transactions involved do not require a registration with the states Division of the
SEC. An offering is made by proposing to another person or persons that they
lend you money in exchange for a promissory note. A minimal notice and filing
fee is required in some states even with an exempt offering.
Threshold: The maximum number of private lenders you can work with before
you have to file a registration with the states Division of the SEC. Some states
do require a notice filing even when you're working with a number of private
lenders up to this threshold level and every state sets its own threshold number.
Disclaimer: A notice you put on your website or other advertising materials to let
people know where you are or are not offering your private lending business or
other important facts about your business. For instance, "This offering may only
be made in the state of Ohio" is an example of a disclaimer.
Disclosure: A description of an important fact or set of facts; typically associated
with a disclosure document, which is a full description of your private lending
business, including the risks involved, your business plan and promised return on
investment. Disclosures should be factual, honest and complete.
PRIVATE LENDING MADE EASY NEWSLETTER

Issue #21
http://www.PrivateLendingMadeEasy.com
In This Issue:
1. What's happening!
2. SEC Questions Answered
3. Important Tip
4. Investor Success Quote
5. Links
=============================================================
SEC Questions Answered
=============================================================
Every now and then, I have students ask me if my home study system is
compatible with state and federal SEC regulations...
Yes, it is compatible per my SEC attorney.
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
and getting asked 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 its 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 an
attorney to do some research. Since each state is able to establish its own
regulations, I decided to have the attorney start his research with my state, the
state of Ohio.
Some highlights while working with my attorney:

1) In Ohio, I can acquire up to ten (10) private lenders without having to file
any paperwork with the Ohio Division of Securities. Once I file the proper
paperwork my number of lenders could be unlimited. Different states have
different minimum numbers allowed and many 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 ten (10) lenders, the paperwork I need to file with the state
before I go over 10 is simple but I would use an SEC attorney to file.
4) I need to give a disclosure statement to potential lenders.
5) I can't pool lender money, but I can if I file the proper paperwork.
6) I can't use the word 'guarantee' in my advertising or anything that would
mislead the lender and be considered fraud.
7) You can NOT advertise unless you file the proper paperwork first.
8) Their regulations are to protect the lender.
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 just want you to
comply with their regulations.
The following is some information from my attorney, Ralph M. Sherman, on SEC
compliance.
Topic: What is a security?

The term 'security' is broadly defined to mean 'any certificate or instrument, or
any oral, written, or electronic agreement, understanding, or opportunity, that
represents title to or interest in, or is secured by any lien or charge upon the
capital, assets, profits, property or credit of any person or of any public or
governmental body, subdivision or agency.'
Thats the language used on the website of the Ohio Division of Securities. This
definition includes such common items as shares of stock, warrants and options,
promissory notes, membership interests in limited liability companies, bonds and
debentures. Limited partnership interests are considered to be securities, while
general partnership interests are generally not considered to be securities. The
statutory definition additionally includes the term 'investment contract,' which has
been construed by court decisions to include numerous investment opportunities
and business opportunities, which at first glance may not appear to fit within the
definition of 'security.'
Topic: Does that mean private lending may be considered securities?

When you are borrowing money from private lenders, you are offering
them a security. Youre making an IOU to them, by borrowing their money and
promising to pay them a fixed interest rate over a certain time period or when the
sale or refinance of a property is concluded. Private lenders are lending you
funds and they make their money by receiving the interest rate youve promised
them.
Ohio and all other states allow securities to be offered to investors when
they are either registered or offered under a proper exemption from registration.
Securities laws do define debt as a type of security. This means that your
business has the same kind of opportunities as businesses that sell shares of
their company to the public. It also means that securities laws and regulations
apply to the business.
Topic: Who regulates securities?
Each state regulates investments offered to its citizens. The federal
government, through the Securities & Exchange Commission (SEC), regulates
offerings across state lines. This means that youll have to look at the laws and
regulations in your state when youre only working with private lenders in your
state. If youre working with folks across state lines, youll need to comply with
the laws in each state youre working in and comply with the SECs rules too.
Topic: What about advertising?
Its important to understand that each state sets its rules for advertising
investment opportunities, which includes private lending. Every state has
opportunities for you to advertise to bring in private lenders. But to do so you
must register.
Youll see this referred to as from 1-10 private lenders or the 3(H)
exemption. You cant advertise to find lenders until you file paperwork (register)
with your states SEC. All states will allow you to advertise to private lenders and
grow your business.
Topic: What about advertising across state lines?

We suggest you use the approach under Rule 504 of Reg. D. If youre looking at
using this approach to reach out to private lenders outside of your home state, it
is possible to advertise to private lenders.
You would use a state exemption that allows you to advertise and only advertise
to accredited investors. Accredited investors are defined elsewhere in this
booklet. The Securities Act of 1933 has several definitions of accredited
investors.
The most important for your business are likely to be these two:
1.
2.
A natural person who has individual net worth, or joint net worth (not
counting their personal residence) with the persons spouse, that
exceeds $1 million at the time of the purchase;
A natural person with income exceeding $200,000 in each of the two
most recent years or joint income with a spouse exceeding $300,000
for those years and a reasonable expectation of the same income level
in the current year.
Topic: What sort of disclosure should I give my private lenders?

When you are reaching out to private lenders, whether its just one person or a
large group, its very important that you disclose the risks and benefits of the
private lending opportunity youre offering them. There are several reasons you
should do this. Some are for the benefit of your private lenders, who will want to
know what your business is and how they can make money by lending money to
you.
Securities laws work to protect private lenders, so you must disclose to them
what the potential downsides are. These might include how long it will take to sell
a property; mortgage rate changes, housing market pricing fluctuations, or the
cost of rehabbing a property. There are others youll want to mention.
Disclosure documents will also help you protect yourself and your business
against possible claims that you didnt describe the business properly. A strong
disclosure document will help you protect your reputation and protect you against
frivolous litigation. It will also help you comply with securities laws and
regulations and, should you get a question from a regulator, help you
demonstrate to them you are working to be in compliance.
Look, real estate is risky so say so in your disclosure statement.
Topic: Commissions
The bottom line on paying commissions is: dont. Unless you are using a proper
registration or exemption and using a licensed or registered broker/dealer, almost
every state prohibits paying commissions for the sale of securities.
Only 3 states do allow some form of this. Only South Dakota, Minnesota and
Texas allow finders to register with the state, pay a fee and help find accredited
investors for a fee or commission. Anyone hiring a finder must be sure the finders
are registered with their state and disclose that they are using them to
find their private lenders.
Now in Ohio, it is possible to pay someone to help you get potential private
lenders to a luncheon, but only if you pay him or her whether or not these folks
end up lending you money. That means that you cant pay them based on their
success rate or anything that connects their compensation to getting private
lenders. Other states wont even let you do that unless the people youre
compensating are registered or licensed broker/dealers.
Seek legal advice to be sure.
Topic: Doing Business
Remember, securities laws and regulations offer you many opportunities to do
your Real Estate investing business and stay in compliance. Yes, theres going to
be some paperwork and fees that go with these laws and regulations. Its just
part of doing business, and thats what Alans course is all about, helping you get
into business and do it the right way and successfully.
Ralph M. Sherman, Esq., is an attorney who has been in practice for over 16
years, working with small-business owners and entrepreneurs to raise funds and
run their businesses in compliance with the laws and helping them to take
advantage of the opportunities they find to build their businesses. Alan Cowgill
has asked him to help his students understand how securities laws affect their
business.
Sincerely,
Alan Cowgill
E. Alan Cowgill is the President of Integrity Home Buyers, Inc and member of
Colby Properties, LLC. He is a real estate investor and has invested in singlefamily and small multi-family properties in Springfield, Ohio. Since 1995 Alan has
done hundreds of real estate transactions and uses private lenders to fund many
of his real estate deals.
10
Compliance Flow Chart

This piece is meant as a guide to the options for being in compliance when you
are seeking private lenders. Please remember that we are using the state of Ohio
for these examples and every state may have different laws or regulations.
In-state only offerings
Notes
Up to 10 private lenders
No filing needed (3H exemption)

No advertising
Not a public offering
Provide a disclosure document
Cannot pool
Above 10 lenders, must file paperwork

(Register)
May advertise and Pool

Provide disclosure document
Across state lines offerings
Notes
Reg. D Rule 504
Raise up to $1 Million per 12

months
File Form D with SEC**
File in every state where you
have private lenders
Provide disclosure document
May advertise to accredited
investors as permitted by each
states laws
File with the Federal SEC
** Reg. D and Form D are defined later in this manual.
11
Questions Answered
What exemptions can I use?
You can look at doing business, just in your own state, using whats known as an
intrastate exemption. You must make sure to comply with your states laws and
regulations, and you must not do business with private lenders from outside of
your state.
Intrastate Offering Exemption Section 3(a)(11) of the Securities Act is generally
known as the "intrastate offering exemption." This exemption facilitates the
financing of local business operations. To qualify for this exemption, your
company must:
-
be incorporated in the state where it is offering the securities

carry out a significant amount of its business in that state; and
make offers and sales only to residents of that state
Your company must determine the residence of each purchaser. If any of the
securities are offered or sold to even one out-of-state person, the exemption may
be lost. Without the exemption, the company could be in violation of the
Securities Act requirements. If a purchaser resells any of the securities to a
person who resides outside the state within a short period of time after the
company's offering is complete (the usual test is nine months), the entire
transaction, including the original sales, might violate the Securities Act.
For example, no SEC filing is required in Ohio if you limit yourself to no more
than 10 private lenders who are all from Ohio. Its possible to advertise if you use
one of the state filings to increase the number of private lenders you can pursue.
All state forms require some basic company information and some attachments
that disclose information about the company, its officers and directors, and the
risks involved. Youll be telling the state what promises you are making to your
private lenders and how you plan to keep them. When you want to advertise,
youll need to submit the materials to the state before using them. Remember,
you cant pay finders (except in 3 states) or pay commissions for business
brought in, though its possible to compensate people if the compensation isnt
connected to whether or not someone becomes a private lender. Its best to
avoid paying finders.
12
STATE EXEMPT TRANSACTIONS

State
Law/Regulation
# Private Lenders/Notes
Alabama
ASA Ch.6 Art.1 Title 8-6-1(9)
10
No filing
Alaska
AS 45.55.900(b)(5)(A)
10
Notice filing
Arkansas
Rule 504.1A(9)
35
Notice filing
Arizona
ARS 44:1844
10
No filing
California
Corp.Code s.25102(f)
35
No filing
Connecticut
Title 36a, Ch. 664 S.36b-21(b)(15)
10
No filing
Colorado
CSA S.11-51-308(1)(i)
10
No filing
Delaware
DSA Sec.7309(b)
25
No filing
District of Columbia DC Code s.31-5604.02(12)(a)
25
No filing
Florida
FSIPA Ch.517.061(11)(a)
35
No filing
Georgia
GSA 10-5-9 (13)(a)
15
No filing
Hawaii
HRS Ch.485-6(9)
25
No filing
Idaho
Title 30, Ch.14, Pt.2 30-14-202(14)
10
No filing
Illinois
ISL Sec.4.G
35
Notice filing
Indiana
23-2-1-2(b)(10)(G)
25
No filing
Iowa
USA 502.203(9)
36
No filing
Kansas
KSA Sec.17-1262(1)
20
No filing
KRS S.292-410(i)
15
No filing
Kentucky
Louisiana
RS 51:709(17)
35
No filing
Maine
Title 32, Ch.105(5)S.10502(2)(P)
10
No filing
Maryland
Title 11 MSA Subtitle 6 (11-602-9)
35
No filing
Massachusetts
MGL Ch.110A S.402(b)(9)
25
No filing
15
Disclosure filing
Michigan
MSA S.402(b)(9)(d)(2)
Minnesota
Minn.Stat., Ch.80A, Sub.2(a)(1)
10
No filing
Missouri
Sec.Act S.409.2-202(14)
25
No filing
Mississippi
MSA Title 75 Ch.71 203(9)
10
No filing
Montana
MCA 30-10-105.8(a)
10
Notice filing
Neb. Stat. Sec. 8-1111 (9)
15
Notice filing
Nebraska
Nevada
NRS Ch.90.530(11)
25
No filing
NHRS Title 38 421-B:17 II(h)
04
Notice filing
New Hampshire
New Jersey
NJS Title 49:12(B)(9)
10
No filing
New Mexico
NMSA Sec.58-13B-27K
25
Notice filing
NYSCL 23-A S.352-g
40
Notice filing
New York
North Carolina
NCGS Ch.78A-17(a)
25
Notice filing
North Dakota
N.D.C.C. Sec. 10-04-06(9)(a)
35
Notice filing
Ohio
1707(O)(1)
10
No filing
25
No filing
Oklahoma
OUSA 1-203(14)
Oregon
OSL S.035-(12)(A)
10
No filing
Pennsylvania*
PSA Sec. 203(d)
25
Notice filing
Rhode Island
RIUSA S.7-11-402(10)
25
No filing
SCCL Title 35 S.35-1-202(14)
25
No filing
South Carolina
South Dakota
USA Ch.47-31B-202(14)
25
No filing
Tennessee
TC Title 48, Ch. 2, S.48-2-103(13)(4)
15
No filing
Texas
Sec.Act S.5(I)(c)
15
No filing
Utah
UCA 61-1-14(2)(q)
15
No filing
9 V.S.A. 4204a (9)
25
No filing
Vermont
13
Virginia
Washington
West Virginia
Wisconsin
Wyoming
CV 13.1-514 (13)(B)(7)
RCW 21.20.320
USA 12-b-9
Wis.Stats. S.551.23(10)
W.S. 17-4-114(b)(ix)
35
10
10
25
15
Notice filing
Notice filing
No filing
No filing
No filing
Please note this is a summary and should serve as a guideline. This is not
intended to be an exhaustive explanation of each states laws and regulations
that cover each of these exempt transactions and you should be sure to stay in
compliance with these laws and regulations. Remember that individuals or
companies using exemptions are obliged to maintain compliance when using
such exemptions.
Notes Defined
No filing means that no paperwork filing is required with the state regulators in
order to use this exemption, as long as you comply with the laws and regulations
covering such an exemption.
Notice Filing: Requires you to file paperwork with the state regulators explaining
what you are offering, who you are offering it to, and other details of the offering.
Some states have pre-approved forms you are supposed to use and other states
ask you to describe the information to them in letter or memorandum form. Some
states have filing fees associated with such filings. These filing fee are usually in
the range of up to $100 to $200 and can be less. Some filing fees depend upon
the total amount of investment you are offering to private lenders.
Disclosure Filing: In Michigan, you must give a private lender your disclosure
statement 48 hours prior to them loaning you money.
In general, the more money you are trying to raise or the more private lenders
you are working with, the more information you have to file with the state
regulators.
14
Pre-notification (Notice Filing): The Thirteen States

1.
Alaska
2.
Arkansas
3.
Illinois
4.
Montana
5.
Nebraska
6.
New Hampshire
7.
New Mexico
8.
New York
9.
North Carolina
10.
North Dakota
11.
Pennsylvania *
12.
Virginia
13.
Washington State
These 13 states require that you first send a letter or form to your states SEC
office to let them know what you are doing before you even approach private
lenders.
*Pennsylvania:
1. You can only make an offer to a total of 90 folks in a 12 month period.
2. You must give your private lender a disclosure document 48 hours in
advance of the loan.
3. Lender cant sell note for 12 months and must sign to this effect.
15
Ohios 3H Exemption (Example)

One of the keys to your private lending home study system is the use of
exemptions for certain types of securities transactions. In particular, there is an
exempt transaction in Ohio, known as a 3H exemption, which is an important
piece.
It is important to remember that each state has the authority to issue its own
securities laws and regulations and that this particular exemption is applicable
only in Ohio. It is also important to note that most states have a similar exemption
and that you may take advantage of such exemptions as part of doing business.
The 3H exempt transaction comes from the following code:
(H) The sale of notes, bonds, or other evidences of indebtedness that are
secured by a mortgage lien upon real estate, leasehold estate other than oil, gas,
or mining leasehold, or tangible personal property, or which evidence of
indebtedness is due under or based upon a conditional-sale contract, if all such
notes, bonds, or other evidences of indebtedness are sold to a single purchaser
at a single sale, is exempt. (Ohio Revised Code, 1707.03).
Ohio, like many states, offers numerous exemptions to its securities laws. There
are both exempt securities, as well as exempt transactions. The 3H exemption is
the second type. This means that while the lender is being offered a security, it is
possible, when done properly, to work with such a lender without filing any
paperwork. As you work with more lenders, you will have to file some paperwork
with the state, but you still get the benefit of reduced paperwork and regulations
because of the exemption.
Its important to understand that in order to use the 3H exemption; the promissory
notes must make clear that private lenders are investing their money for
mortgaged properties. Its also important that the mortgages are recorded.
Additionally, you will want to record a UCC filing with the proper office. In Ohio,
all UCC filings are now done with the state and no longer at the county level. The
state of Ohio even offers online UCC filings. UCC stands for Uniform Commercial
Code, which is based on a model used in most US states. A UCC-1 filing records
information about a lender, as well as the property involved and the investor, who
is a borrower for these purposes. This is another tool for securing your lenders
investment and for putting the public on notice about the transaction.
Its also a very helpful tool for documenting that the lender is investing in a
transaction that falls under the 3H exemption, and that is good for the lender.
16
Frequently Asked Questions

Q: What is the role of the Division of Securities?
A: The Division of Securities (Division) administers the Ohio Securities Act,
(Revised Code Chapter 1707) by (i) overseeing the licensing of securities
salespersons, dealers, investment advisers, and investment adviser
representatives (ii) requiring all securities sold in Ohio to be registered, properly
exempted from such registration, or notice filed, and (iii) investigating alleged
violations of the Ohio Securities Act and enforcing its provisions.
The Division enforces its licensing, registration and anti-fraud standards through
three primary remedies: administrative actions, civil injunctive actions, and
criminal prosecutions. Enforcement actions must be brought within five years of
the alleged violation.
Q: What is the jurisdiction of the Division?
A: The Ohio Securities Act applies to all "securities" which are "sold" in Ohio.
Thus, the Division has jurisdiction over all securities transactions in Ohio as well
as where an offer or sale originates outside Ohio but is made to an Ohio resident,
and where an offer or sale originates in Ohio but is made to a non-Ohio resident.
Q: Does a "security" mean more than just stock?
A: Yes. The term "security" is broadly defined in the Ohio Securities Act to mean
"any certificate or instrument, or any oral, written, or electronic agreement,
understanding, or opportunity, that represents title to or interest in, or is secured
by any lien or charge upon the capital, assets, profits, property or credit of any
person or of any public or governmental body, subdivision or agency." Included in
the definition are such common items as shares of stock, warrants and options,
promissory notes, membership interests in limited liability companies, bonds and
debentures. Limited partnership interests are considered to be securities, while
general partnership interests are generally not considered to be securities. The
statutory definition additionally includes the term "investment contract," which has
been construed by judicial decisions to include numerous investment
opportunities and business schemes which at first glance may not appear to fit
within the definition of "security".
Q: What constitutes a "sale" for purposes of the Ohio Securities Act?
A: The term "sale" is defined broadly as meaning "the full meaning of sale as
applied by or accepted in courts of law or equity, and includes every disposition,
or attempt to dispose, of a security."
Q: Must all "sales" of "securities" in Ohio be registered with the Division?
A: If the Ohio Securities Act applies, its fundamental requirements are (i) that all
sales of securities be registered with the Division, properly exempted from
registration or notice filed; and, (ii) that the persons selling the securities be
licensed by the Division or properly exempted from licensure.
17
No Advertising Allowed
You cant advertise to find private lenders unless you submit your states required
documents and pay a small fee.
Our three home study systems defined: The Basic System gives you the education
and tools to borrow private funds from Family, Friends, and Associates. Every state
allows us to do that. But you need to have a pre-existing relationship with them.
The Premium System is for targeting folks you a pre-existing relationship with or for
strangers and advertising. You Can Not advertise to find private lenders unless you fill
out the states required documents and pay a small fee. The same holds true if you
want to exceed the # of private lenders (a threshold) that the state allows. This is the
system that has our luncheon slides.
The Wealth Management System is designed for once you get a private lender to
manage them. This home study system helps you manage the private lender process
and had all of my private lender office forms. The Wealth Management system is a
companion for either The Basic or The Premium Systems.
Example: Alans State - Ohio
I invest in Ohio. Im allowed ten lenders every sixteen months. This is a small
limitation, however if I want more I fill out the proper paperwork, pay a fee, and I
can use unlimited lenders. My dollar limit is one million, but again if I want to go
higher I simply submit the paperwork.
If I want to advertise, I have to fill out the same paperwork, submit my advertising
and pay a fee.
Instead of restrictions I try to look at the SEC rules as specifications. It doesnt
really keep me from doing the things I want, as long as I take some time for the
formalities of the paperwork. The SEC just wants me on their radar so they can
separate me from the bad guys. Once they see what Im doing, know Im one of
the good guys, and Ive complied with their rules, they can take their attention to
the next guy down the line.
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Disclosure Document
What is a Disclosure Document
The All Important Disclosure Statement
Whether you have no private lenders yet or a bunch of them, you must have a
disclosure document.
This is a no option item.
When you are looking to get a new private lender, the first thing you hand them is
a disclosure document. You see all real estate investments are risky. Therefore
you have to tell your private lenders that in your disclosure document.
If you are ever asked by the SEC to show them yours, you had better be able to
produce it and prove that every lender got a copy of it.
If you don't have one, then you need to start immediately on creating one. Then
I'd run it by a SEC attorney to see if it is good enough. They are roughly 10
pages long for a basic one.
When you are offering private lenders the opportunity to work with you, you must
be sure to disclose to them the risks and rewards of the business. You should
prepare a disclosure document.
A disclosure document has legal consequences. If a private lender is not given
sufficient, material information and suffers a loss, he may have a claim against
you and your business. The information you give private lenders must be
accurate and not misleading. The key test is if you have given private lenders all
material (significant) information about your business at the time the investment
was made. It is therefore important to follow the SECs disclosure regulations in
your document.
What are these guidelines? In general, they are:
The Business of the Company This information generally includes a
description of your private lending business, location of the company's facilities,
trends in the industry, and the company's marketing strategies.
An example would be
"Integrity Home Buyers, Inc. is a real estate investment company. We work with
private lenders and put their funds to use in residential property investments that
are secured by mortgages. These transactions are done in compliance with
relevant laws and regulations and in compliance with appropriate securities
registrations or exemptions in every state in which we do business..."
19
Risk Factors These factors vary depending upon the company and the nature
of its business. They may include cash flow difficulties, market competition,
inexperience of management, and dependence upon an unproven product,
absence of operating history or profitable operations.
The real estate industry is particularly sensitive to economic downturns. The
value of securities of issuers in the real estate industry can be affected by
changes in real estate values and rental income, property taxes, interest rates,
and tax and regulatory requirements.
Use of Proceeds The use of the funds to be received from the offering should
be set forth with a high degree of specificity. Categories of expenditures may
include such items as leases, rent, utilities, payroll, and purchase of equipment,
payment of notes, advertising costs, insurance, supplies, and payments to be
made immediately to officers.
Key Personnel and Shareholders Individuals who direct the company's
operations or who make significant contributions to the business of the company
as employees, independent contractors, consultants, or otherwise are identified
and important background information such as education, age, and business
experience of these persons is disclosed. Principal shareholders of the company
are identified with a description of the number and percentage of shares
beneficially owned.
Financial Statements Financial information, such as balance sheets and
statements of income and cash flows that accurately describes the financial
condition of the company, is typically provided. In some circumstances, these
financial statements must either be audited or reviewed by a Certified Public
Accountant.
Other key points...
This is where you should give people access to information about your business.
If youre new to this business, give people some projections of what you hope to
do with the business that is reasonable and conservative. Its good business to
under-promise and over-deliver.
You should distinguish between facts and beliefs in your disclosure. Restrained
language should be used throughout the text. At the practical level, many
investors are accustomed to reading carefully worded disclosures and they are
suspicious of broad, unqualified claims. An understated, factual disclosure can
deliver a powerful message to private lenders.
Avoid arcane jargon and technical terms. Provide definitions for terms that might
not be easily understood. Dont make private lenders learn a new language if
they want to understand your disclosure document.
20
Have an SEC attorney create or review your disclosure statement before you
distribute it. Ask the private lender to sign a piece of paper to acknowledge the
date they got it and put in your file.
What is required?
A sound business plan
A disclosure document disclosing the full facts of the investment and
business
A SEC lawyer experienced in disclosures
The bottom line... by giving your lender a disclosure document, it shows the
lender exactly what is going on with their loan. You will have a meeting of the
minds and everything is on the table.
You will be a huge step forward by being professional and in avoiding potential
problems in the future.
Besides, it's required in every state.
The following pages show a sample disclosure document.
21
Typical Disclosure
(Your Company Name)
Disclosure Document
PROPRIETARY AND CONFIDENTIAL
This document includes information that is proprietary and confidential and is not
to be copied or distributed without the approval of an officer of (Your Company
Name).
This offer is limited to (Your State) investors and has been prepared to comply
with the laws and regulations of the State of (Your State).
Because this Disclosure Document focuses primarily on details concerning the
company rather than the industry in which the company operates or will operate,
potential investors may wish to conduct their own separate investigation of the
company's industry in order to obtain broader insight in assessing the company's
prospects.
THE COMPANY
(Your Company Name) (Company) is a (corporation) registered in the State of
(Your State) and was incorporated on (Your Date). Its office is located at (Your
Business address), within (Your County) County, (Your State) and its telephone
number is (Your Phone Number).
(Your Company Name) is a private Real Estate Investing Company, founded by
(Your Name) to acquire, rehabilitate, lease or resell residential and commercial
real estate. (Your Name) started investing in real estate in (1995 and started the
company in 2000 with the goal of providing affordable rental housing in the
Urbana and Springfield, Ohio area. The company is not a realtor; it is a real
estate investor. As the company grew, we understood that many of our
customers, while wanting to own their own home, had economic, employment or
credit problems, which kept them from qualifying for a traditional mortgage loan.
Because we quickly recognized that huge pent-up demand, we expanded our
rental business to include creating affordable, single-family housing throughout
mid-west Ohio). *This is to be your story*
The Company is experienced on purchasing homes that market for at least
($225,000). It is the Companys opinion that homes below this price point are
neither as desirable nor as potentially profitable as homes at or above this price
point. There are several factors that lead us to this conclusion.
Key to our analysis is our belief and experience that homes below this price point
are not maintained as well by our customers, and that they are simply less
desirable to potential homebuyers.
22
(Your Company Name) has developed creative home purchase financing

techniques such as a Land Contract or Lease Purchase Agreement, Retail
(rehab plus sell for all cash) and Wholesale (no rehab and sell for all cash) which
allows Customer/Buyers to make an initial down payment or option deposit while
occupying the home. This allows our Customers/Buyers to make progress toward
home ownership. Please note that these down payments or option deposits are
non-refundable and the purchase price for each property is set when the
agreement is signed. While living in what will eventually be their own home, our
Customer/Buyers can build equity, repair their credit, establish a reputable
financial management history and ultimately become qualified for a standard
home mortgage. This model also gives our customers a financial incentive to
maintain their properties.
Through these programs Customer/Buyers will pay a down payment or option fee
along with monthly payments, giving these Customer/Buyers the time and
opportunity to increase their ability to secure a traditional home mortgage from a
bank or other financial institution.
Additionally, we will offer to our Customer/Buyers interested in purchasing a
home information and assistance in building up their credit scores, enabling them
to be better positioned to obtain their own traditional mortgage, which in turn will
improve the Companys ability to work with customers who can become
homebuyers.
Our Customers/Buyers understand and appreciate that (Your Company Name)
has demonstrated a strong commitment to parts of the community whose
housing needs have been badly underserved and where few realistic options
have been available to those seeking and capable of home ownership. (Your
Company Name) not only provides affordable housing but also by the very nature
of the business, helps the local economy by providing work for local contractors,
realtors, mortgage companies and other related businesses.
23
RISKS OF INVESTMENT
The Company uses funds borrowed from private lenders to invest in real estate
primarily but not necessarily exclusively in and around (Your City, County and
State). We focus on residential properties, although we will consider investing in
commercial and other properties in certain circumstances.
As a real-estate investment company, we are subject to risks including, but not
limited to:
fi
Availability of investment capital from private lenders
fi
Local real estate markets
fi
Competition from other real-estate investment companies, which may offer

competitive interest rates or possibly better terms and/or conditions to
private lenders
fi
Availability of investment-grade properties
fi
Legal and regulatory issues
fi
Costs associated with rehabbing and maintaining properties
fi
The possibility of selling a home for less than it was purchased
fi
The possibility of selling a home for less profit than anticipated
fi
The possibility of a home going unsold for an extended period of time
fi
Unanticipated repair costs
fi
Changing market conditions
fi
Interest rate changes
fi
Potential damage caused by customers
fi
The death or disability of (You or Your Officers)
fi
Potential lack of demand for a property or types of property
fi
The Companys current shareholders equity of [$00.000 or ($00,000)]

*Positive or negative depending on your actual results or projections.* This
means that the Company currently has positive/negative earnings. The
Company projects that these positive/negative earnings, which have been
increased/reduced in the past year, will continue to be increased/reduced
and that the Company may reach positive/negative earnings within 2008,
but the Company cannot guarantee this result.
24
MANAGEMENT
fi (Your Name) is the president and sole director of the company. He has
served as president of the company since its formation.
fi The company compensates (Your Name) out of its profits from its real estate
investments.
fi (Your Name) owns all the stock of the corporation. (There are 850 common
shares, without par value, all owned by (Your Name)).
fi (Your Name) receives annual compensation of ($00,000)*your salary* from
the Company.
COMPANY OPERATIONS
Payments will be made to our private lenders on a monthly basis or at a time the
property is sold. Invested funds will be secured with a mortgage on the
properties, and when appropriate, with a state UCC filing to record the security
interest in the properties. Hazard insurance will be secured on the properties,
payable to our private lenders.
(Your Name) and his staff know the local real estate markets and look at
numerous properties before purchasing them. They use qualified contractors to
rehab purchased properties. Real estate attorneys conduct closings.
TERMS OF THE OFFERING
The company is offering its investors (private lenders or lenders) the
opportunity to invest with the company. The minimum investment is ($25,000).
The total offering is for investments up to ($1,750,000). Only investors resident in
the State of (Ohio) will be offered or sold such investment and any person or
business entity not resident in the State of (Ohio) who may attempt to invest or
invest in the company may and shall have such investment cancelled and funds
returned upon the discovery of same. The investment is a security and will only
be offered by registration or exemption under Ohio laws and regulations, and in
compliance with both state and federal laws and regulations.
This offering is being made to Ohio residents and is exempt from registration
pursuant to Ohio Revised Code Sections 1707.02, 1707.03.
We will use a tiered interest-rate system. This system was created so as to offer
investors a rate of return better than what is available from local banks on
certificates of deposit or other, similar deposit products. The tiers are also
intended to give incentives to investors to invest more, or to invest their funds
with Integrity on an accrual basis. Accrual basis means that an investor will allow
his/her funds to accrue simple interest with us until the sale of the home.
25
The company has existing Private Lenders whose interest rates have been
grandfathered in with the company. The Company currently has funds from
private lenders in the amount of $0,000,000. These are outstanding securities of
the Company.
Private Lenders will receive individual offers of interest rates at the time of them
receiving this offering, based upon market conditions, interest rates, and inflation.
The amount of funds they wish to lend to the company, and other relevant
factors.
The company will pay simple interest, calculated annually. Private Lenders
wishing to receive monthly payments will receive a lower interest rate than those
Private Lenders whose funds accrue until the sale of a property or properties on
which their funds were used.
USE OF PROCEEDS
The funds will be used to:
fi
Invest in newly purchased residential real estate identified in the

debenture.
fi
Invest in residential real estate currently owned by the company by retiring

existing debentures.
fi
Invest in other types of real estate within the State of (Ohio), at its
discretion.
fi
No commissions will be paid to any person or business entity for the sale
of these securities, unless and except if they are licensed and/or
registered broker-dealers within the State of (Ohio), and the company
does not anticipate doing so in any case, and may only be sold by
authorized representatives of the company and in compliance with all
relevant securities laws and regulations.
FINANCIAL INFORMATION
The following information is in summary form, from financial information on the

company as of March 31st, 2011. This does not reflect a full picture of the
detailed financial information of the Company and is not intended to do so. This
information is presented for your consideration and more detailed financial
information is available, upon request. As you may know, under accounting
principles, assets and liabilities must equal each other.
(NOTE: ADDITIONAL HISTORIC EARNINGS WILL BE ATTACHED TO THIS
OFFERING CIRCULAR AS SOON AS THE COMPANYS ACCOUNTANT HAS
PREPARED THEM. THE COMPANYS TAX YEAR ENDS MARCH 31ST. THE
FINANCIAL STATEMENTS ARE COMPILED STATEMENTS, ATTESTED TO
BY THE COMPANYS PRESIDENT, (Your Name). THIS OFFERING CIRCULAR
26
WILL ALSO INCLUDE ADDITIONAL INFORMATION REGARDING THE

COMPANYS PAST OPERATIONS AND ASSETS)
Past operations of the Company included buying homes, the average sales price
of which was under $150,000. The Company also had a large number of renters
who did not purchase the properties they had rented. The Company has over the
past year changed a number of its operations, in order to reduce costs and
improve profits.
These improvements include:

The Company no longer purchases homes with an average sales price
below $150,000.
The Company only purchases home with an average sales price of
$225,000 or greater.
The Company has sold a number of previously purchased homes with the
lower average sales price.
The Company may be able to sell more of its previously purchased
homes, including three in an area of Springfield, Ohio near where a new
hospital is being developed.
The Company has switched from a rent-to-own business model to land
contracts.
Land contracts have proven to be a better business model, including
helping the Company to find and build business relationships with future
home purchasers who are more likely to purchase their homes from the
Company.
Land contract customers pay for their own property taxes and insurance,
which reduces these costs for the Company.
The Company offers help to our customers by making available a

mortgage liaison associate, who helps customers find and work with
mortgage providers, to help customers improve their opportunity to obtain
a mortgage.
The Company has also offered, to a number of its customers without a

credit history, the opportunity to build a credit history that should improve
their opportunities to obtain a mortgage.
Since we began purchasing homes in 2005 that normally sell for at least
$225,000 (Two Hundred Twenty Five Thousand Dollars), we have
increased Integritys average profit per house to $55,700.
27
Total Assets:
$2,594,450
(Including current assets, and property
and equipment after accumulated
depreciation)
Please note that the Companys largest
assets are its property inventory and
mortgage receivables.
Total Liabilities and Shareholders Equity:
$2,594,450
(Including current liabilities, long-term

liabilities and shareholders equity)
Please note that the Companys largest
liabilities are notes payable to private
lenders and mortgages payable to
mortgage companies and financial
institutions.
GOVERNMENT REGULATION
The Company is subject to various types of regulations concerning its business
operations, including those governing the purchase and sale of real estate and
the offering and sale of securities. The Company attempts to comply with all
applicable laws and the regulations in every phase of its operations, and believes
that it is currently in compliance with all applicable laws and regulations.
In April 2007, the Company was ordered by the Ohio Division of Securities to
cease and desist from certain acts and practices undertaken during or before
2005 and found to be in violation of Ohio Revised Code Chapter 1707, including
the use if misleading marketing materials and the omission of material facts
concerning the Companys finances. The Company has taken steps to correct
these issues and the Company believes the matter is now closed.
LITIGATION
The company is, from time to time, engaged in certain litigation related to the
eviction of customers unable or unwilling to pay rent or otherwise abide by their
rental agreement with the company. There is no past, present, or anticipated
litigation that would have a material effect on the business, financial condition, or
operations of the Company.
28
DISCLAIMERS
THESE DEBT SECURITIES ARE NOT REGISTERED WITH THE SECURITIES
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"). THESE DEBT SECURITIES ARE BEING OFFERED AND SOLD IN
RELIANCE ON SECTION 3(A)(11) OF THE SECURITIES ACT OF 1933, AND
ITS COUNTERPART RULE 147, SOMETIMES DESCRIBED AS THE
INTRASTATE EXEMPTION, AND UNDER THE BLUE-SKY LAWS OF THE
STATE OF OHIO. EXEMPTIONS AVAILABLE UNDER R.C. SECTIONS 1707.02
AND 1707.03.
ALL PURCHASES MUST BE MADE FOR INVESTMENT PURPOSES ONLY
AND NOT WITH THE VIEW TO OR FOR SALE IN CONNECTION WITH A
DISTRIBUTION OF THE SECURITY. ANY RESALE OF A SECURITY SOLD IN
RELIANCE OF THIS EXEMPTION WITHIN 12 MONTHS OF THE SALE SHALL
BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND NOT FOR
INVESTMENT, EXCEPT A RESALE PURSUANT TO A REGISTRATION OR TO
AN ACCREDITED INVESTOR PURSUANT TO AN EXEMPTION.
NO PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OF ANY KIND
WHATSOEVER CONCERNING THE COMPANY OR THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS CIRCULAR, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
NEITHER THE DELIVERY OF THIS DISCLOSURE DOCUMENT NOR ANY
SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
DESCRIBED HEREIN SINCE THE DATE HEREOF, OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME AFTER
THE DATE IT WAS FIRST DISTRIBUTED. THIS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION IN ANY STATE TO ANY PERSON TO WHOM
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
FORWARD LOOKING STATEMENTS
THE COMPANY AND ITS REPRESENTATIVES MAY FROM TIME TO TIME
MAKE WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS. ONE CAN
IDENTIFY THESE FORWARD-LOOKING STATEMENTS BY USE OF WORDS
SUCH AS "STRATEGY," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES,"
"WILL," "CONTINUES," "ESTIMATES," "INTENDS," "PROJECTS," "GOALS,"
"TARGETS" AND OTHER WORDS OF SIMILAR MEANING. ONE CAN ALSO
IDENTIFY THEM BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO
HISTORICAL OR CURRENT FACTS. THESE STATEMENTS ARE BASED ON
OUR ASSUMPTIONS AND ESTIMATES AND ARE SUBJECT TO RISKS AND
UNCERTAINTIES.
29
IN CONNECTION WITH THE "SAFE HARBOR" PROVISIONS OF THE

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY
IS HEREBY IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS AND OUTCOMES TO DIFFER MATERIALLY FROM
THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT MADE BY
OR ON BEHALF OF THE COMPANY; ANY SUCH STATEMENT IS QUALIFIED
BY REFERENCE TO THE FOLLOWING CAUTIONARY STATEMENTS.
THE COMPANY'S BUSINESS IS SUBJECT TO COMPETITION, CHANGES IN
THE MARKETPLACE, AND THE EFFECTS OF CHANGING HOME PRICES
AND/OR INTEREST RATES AND LOCAL ECONOMIC CONDITIONS. OUR
RESULTS ARE DEPENDENT UPON OUR CONTINUED ABILITY TO BORROW
MONEY FROM PRIVATE LENDERS, LOCATE PROPERTIES WORTH
PURCHASING, REHABILITATING AND RESELLING OR LEASING TO
CUSTOMERS INTERESTED IN PURCHASING SUCH PROPERTIES,
ANTICIPATING AND RESPONDING TO CHANGING MARKET CONDITIONS,
AND OTHER IMPORTANT FACTORS INCORPORATED INTO THIS SECTION
BY REFERENCE, WHICH COULD CAUSE THE COMPANY'S RESULTS TO
DIFFER MATERIALLY FROM RESULTS THAT HAVE BEEN OR MAY BE
PROJECTED BY OR ON BEHALF OF THE COMPANY. THE COMPANY
CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS NOT
EXCLUSIVE. ANY FORWARD-LOOKING STATEMENTS ARE MADE AS OF
THE DATE OF THE DOCUMENT IN WHICH THEY APPEAR. THE COMPANY
DOES NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING
STATEMENT THAT MAY BE MADE FROM TIME TO TIME BY OR ON BEHALF
OF THE COMPANY.
THIS OFFER IS SUBMITTED ON A CONFIDENTIAL BASIS FOR USE SOLELY
IN CONNECTION WITH YOUR CONSIDERATION OF THIS OFFER. THIS
DISCLOSURE DOCUMENT MAY NOT BE REPRODUCED IN WHOLE OR IN
PART, AND NO ONE, FOR ANY REASON, SHOULD RELY ON ANY
REPRODUCTION OF THIS MEMORANDUM.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR
HAS THE COMMISSION OR ANY OTHER AUTHORITY ASSESSED THE
ACCURACY OR ADEQUACY OF THIS DISCLOSURE DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS DISCLOSURE DOCUMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED. NO SALE WILL BE
CONSUMMATED PURSUANT TO THIS DISCLOSURE DOCUMENT IN ANY
STATE OR JURISDICTION OTHER THAN IN THE STATE OF OHIO.
30
Whats the SCOR?

Forty of the fifty states allow you to use a SCOR disclosure to borrow
funds from private lenders. SCOR is the Small Corporate Offering Registration.
Here are some key benefits of using SCOR registration:
1. You can raise up to $1 million dollars every 12 months from private
lenders.
2. You can advertise to raise these funds.
3. You can borrow from accredited investors or just plain folks using a SCOR
registration.
4. Even if youre not sure about how to prepare a disclosure document, dont
worry. You can use the SCOR form (called a U-7) in place of a disclosure
document.
5. Many of these 40 states will let you use the same form from another state
so you can borrow money in two or more states at the same time. This
process is known as regional review, because neighboring states often will
accept a SCOR registration from another state.
What about the Form U-7? Its a standardized form that everyone filing a
SCOR offering uses. Yes, its longer than your ordinary state filing form, and
thats because its chock full of basic questions that will help tell your story to
potential private lenders. Instead of going sentence by sentence, it helps you
describe the risks and benefits of lending money to your business.
See our home study system The Real Estate Investors Bible to the SEC for
more information on the SCOR.
31
Disclaimers
Advertising Disclaimers (short & long)
This is text to be used in any advertising material, letters, documents, and other
materials. It combines a notice about securities and public offerings.
Long Form:
1) This is not a public offering. This is not an offer or invitation to sell or a
solicitation of any offer to purchase any securities in the United States or
any other jurisdiction. Any securities may only be offered or sold, directly
or indirectly, in the state or states in which they have been registered or
may be offered under an appropriate exemption.
Short form advertising disclaimer:
2) This is not a public offering or offer or invitation to sell securities or make
an investment.
Note: There are disclosures and disclaimers. You will use both.
32
Website Disclaimer (fill in the blank)

(name of business) may from time to time offer securities in
the financial markets. The information provided through this website does not
constitute or form part of any offer or invitation to sell or any solicitation of any
offer to purchase any securities in the United States or any other jurisdiction. Any
securities may only be offered or sold, directly or indirectly, in the state or states
in which they have been registered or may be offered under an appropriate
exemption.
(name of business) will, when it does offer such securities,
offer them in the following state or states: (list state or states)
Only persons in these states will be offered such securities and only under
appropriate registration or exemption, and no person from any other state or
jurisdiction is or will be offered such investments or securities.
(name of business) has made all reasonable efforts to ensure
that all information provided through its website on the Internet is accurate at the
time of inclusion; however there may be inadvertent and occasional errors.
(name of business) does not guarantee, and makes no
representations or warranties of any kind whether express or implied about, the
information and opinions provided through this website, including any items used
either directly or indirectly from its website, and reserves the right to make
changes and corrections at any time, without notice.
(name of
business) accepts no liability for any inaccuracies or omissions in its website and
any decisions based on information and opinions contained in its website are the
sole responsibility of the visitor. Links to other websites are provided for your
convenience, but we are not responsible for the contents of any external
websites which link to this website or which are linked to from it. We accept no
liability for any direct, special, indirect or consequential damages, or any other
damages of whatsoever kind resulting from whatever cause through the use of
any information and opinions obtained either directly or indirectly from our
website.
This website may contain information about the past investments and successes
of the business. It should be remembered that past performance cannot
guarantee future performance.
33
This website may contain statements concerning our business, financial

condition, results of operations and certain of our plans, objectives, projections,
expectations or beliefs with respect to these items. These statements may
constitute forward-looking statements as that term is defined in the United States
Private Securities Litigation Reform Act of 1995. These statements include,
without limitation, those concerning the companys strategy and its ability to
achieve it, expectations regarding real-estate investments, investment plans, and
those preceded by, followed by, or that include the words "believe," "expect,"
"intend," "plan", "anticipate" or similar expressions.
The company cautions that any forward-looking statements on this website may
and often do vary from actual results and the differences between these
statements and actual results can be material. Accordingly, readers are
cautioned not to place undue reliance on these forward-looking statements. The
company undertakes no obligation to release publicly the result of any revisions
to any forward-looking statements that may be made to reflect subsequent
events or circumstances.
By their nature, forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those expressed or implied by
such statements. There are a number of factors that could cause actual results
and developments to differ materially from those expressed or implied by these
forward-looking statements.
The company may from time to time offer securities in the financial markets. The
information provided through this website does not constitute or form part of any
offer or invitation to sell or any solicitation of any offer to purchase any securities
in the United States or any other jurisdiction. Any securities may only be offered
or sold, directly or indirectly, in the state or states in which they have been
registered or may be offered under an appropriate exemption.
This website is not directed at any person in any jurisdiction where for any
reason the publication or availability of this website is prohibited.
Copyright information:
The information and images contained within these pages are copyright 20
(name of business inserted here). All rights reserved.
Special Note: In all states, websites are considered advertising and therefore
you will need to register with your state before using your website to advertise.
34
Doing Business Across State Lines

Topic: Reg. D 504 and Advertising
If youre looking at using this approach to reach out to private lenders outside of
your home state, it is possible to advertise. You must use a state exemption that
allows you to advertise and only advertise to accredited investors. Accredited
investors are defined elsewhere in this booklet. As a reminder, the Securities Act
of 1933 has several definitions of accredited investors. The most important for
your business are likely to be these two:
1. A natural person who has individual net worth, or joint net worth with the
persons spouse, that exceeds $1 million at the time of the purchase;
2. A natural person with income exceeding $200,000 in each of the two most
recent years or joint income with a spouse exceeding $300,000 for those
years and a reasonable expectation of the same income level in the
current year.
If you want to do business outside of your state, Regulation D establishes three
exemptions from Securities Act registration.
The one we focus on is called Rule 504 and provides an exemption for the offer
and sale of up to $1,000,000 of securities in a 12-month period. You can use this
exemption for a public offering of your securities and investors will receive freely
tradable securities under the following circumstances:
You register the offering exclusively in one or more states that require a
publicly filed registration statement and delivery of a substantive disclosure
document to investors.
You register and sell in a state that requires registration and disclosure
delivery and also sell in a state without those requirements, so long as you
deliver the disclosure documents mandated by the state in which you
registered to all purchasers.
You sell exclusively according to state law exemptions that permit general
solicitation and advertising, so long as you sell only to "accredited investors.
You take active steps to ensure you are not selling securities to nonaccredited investors.
You sell "restricted" securities, meaning that you may not sell the securities
without registration or an applicable exemption.
Even if you make a private sale where there is no specific disclosure delivery
requirement, you should take care to provide sufficient information to investors to
avoid violating the antifraud provisions of the securities laws. While companies
using the Rule 504 exemption do not have to register their securities and usually
do not have to file reports with the SEC, they must file what is known as a Form
D after they first sell their securities.
Form D is a brief notice that includes the names and addresses of the companys
owners and stock promoters, but contains little other information about the
company. Weve included a copy of this form for you to look at.
35
Sample Form D This is the 504 Reg. D form that you need to fill out when you
cross state lines. This form can only be submitted electronically online at
http://www.sec.gov/about/forms/formd.pdf. You still need to fill out the state forms
for each state in which you plan to work with private lenders.
36
37
38
39
40
41
42
43
44
45
46
Accredited Investors
When you are looking for private lenders outside of your home state, you will be
using one of Regulation Ds exempt offerings to reach them. Whether youre
using rules 504, 505 or 506, its helpful to know about accredited investors. There
are several definitions of such accredited investors. Below, youll find Under the
Securities Act of 1933, a company that offers or sells its securities must register
the securities with the SEC or find an exemption from the registration
requirements. The Act provides companies with a number of exemptions. For
some of the exemptions, such as rules 505 and 506 of Regulation D, a company
may sell its securities to what are known as "accredited investors."
The federal securities laws define the term accredited investor in Rule 501 of
Regulation D as:
1. A bank, insurance company, registered investment company, business
development company, or small business investment company;
2. An employee benefit plan, within the meaning of the Employee Retirement
Income Security Act, if a bank, insurance company, or registered
investment adviser makes the investment decisions, or if the plan has total
assets in excess of $5 million;
3. A charitable organization, corporation, or partnership with assets
exceeding $5 million;
4. A director, executive officer, or general partner of the company selling the
securities;
5. A business in which all the equity owners are accredited investors;
6. A natural person who has individual net worth, or joint net worth with the
persons spouse, that exceeds $1 million at the time of the purchase;
7. A natural person with income exceeding $200,000 in each of the two most
recent years or joint income with a spouse exceeding $300,000 for those
years and a reasonable expectation of the same income level in the
current year; or
8. A trust with assets in excess of $5 million, not formed to acquire the
securities offered, whose purchases a sophisticated person makes.
47
Public Offering
You will hear the term public offering discussed in your investing business. Its
easiest to explain what it means by explaining what a public offering isnt.
Generally, any offering that is not exempt under the private offering exemption of
the securities act of 1933 (Regulation D) is a public offering. This means that if
you arent using an exempt offering, as we talk about extensively in the interview
and in this course, then you are getting involved in a public offering. Each and
every state has its own definition of exempt offerings and these arent considered
to be public offerings.
48
NASAA Note
This section is for your information and convenience. Youll find contact
information for the different securities regulators across the US. The SEC
governs the federal level and each state has its own securities regulator too,
along with the District of Columbia and Puerto Rico.
The following summarizes what NASAA is, which can be found at their website,
www.nasaa.org:
Organized in 1919, the North American Securities Administrators Association
(NASAA) is the oldest international organization devoted to investor protection.
NASAA is a voluntary association whose membership consists of 66 state,
provincial, and territorial securities administrators in the 50 states, the District of
Columbia, Puerto Rico, Canada, and Mexico.
See the member list on the next few pages.
49
NASAA MEMBER REPRESENTATIVE LIST

Alabama
Securities Commission
401 Adams Avenue
Second Floor
Montgomery, AL 36130
P.O. Box 304700
Montgomery, AL 36130-4700
http://www.asc.state.al.us/
North Carolina
Secretary of State
Securities Division
Old Revenue Complex
2 S. Salisbury St Raleigh, NC 27601
http://www.secretary.state.nc.us/sec/
David S. Massey
Deputy Securities Administrator
(919) 733-3924
(919) 821-0818 (Fax)
Joseph P. Borg
Director
(334) 242-2984
(800) 222-1253
(334) 242-0240 (Fax)
North Dakota
600 East Boulevard
State Capitol
5th Floor
Bismarck, ND 58505-0510
http://www.ndsecurities.com/departmentinfo/default.asp
Alaska
Dept. of Community and Economic
Development
Div. of Banking, Securities & Corporations
150 Third Street, Room 217
P.O. Box 110807
Juneau, AK 99811-0807
http://www.ccsd.cc.state.az.us/
Karen Tyler
Commissioner
(701) 328-2910
(701) 328-2946 (Fax)
Lorie Hovanec
Director
(907) 465-2521
(907) 465-2549 (Fax)
Ohio
Division of Securities
77 South High Street
22nd Floor
Columbus, OH 43215
http://www.com.ohio.gov/secu/
Arizona
Corporation Commission
Securities Division
1300 West Washington Street
Third Floor Phoenix, AZ 85007
http://www.ccsd.cc.state.az.us/
Andrea Seidt
Commissioner
(614) 644-7381
(614) 466-3316 (Fax)
Matthew J. Neubert
Director
(602) 542-4242
(602) 594-7470 (Fax)
Oklahoma
Department of Securities
1st National Center
Suite 860
120 N. Robinson Oklahoma
City, OK 73102
http://www.securities.ok.gov/
Arkansas
Securities Department
Heritage West Building
201 East Markham, Room 300
Little Rock, AR 72201-1692
http://www.securities.arkansas.gov/
Irving Faught
Administrator
(405) 280-7700
(405) 280-7742 (Fax)
Heath Abshure
Securities Commissioner
(501) 324-9260
(501) 324-9268 (Fax)
50
Oregon
Department of Consumer & Business Services
Div. of Finance & Corp. Securities
350 Winter Street NE
Room 410
Salem, OR 97301-3881
http://www.cbs.state.or.us/external/dfcs/
California
Department of Corporations
1515 K Street, Suite 200
Sacramento, CA 95814
http://www.corp.ca.gov/
Preston DuFauchard
Commissioner
(916) 445-7205
David Tatman
Division Administrator
(503) 378-4140
(503) 947-7862 (Fax)
Colorado
1560 Broadway, Suite 900
Denver, CO 80202
http://www.dora.state.co.us/securities/
Pennsylvania
Eastgate Office Building
1010 North 7th Street
2nd Floor
Harrisburg, PA 17102-1410
http://www.psc.state.pa.us/
Fred J. Joseph
(303) 894-2320
(303) 861-2126 (Fax)
Steven D. Irwin
Commissioner
(717) 787-8061
(717) 783-5122 (Fax)
Connecticut
Department of Banking
260 Constitution Plaza Hartford, CT
06103-1800
http://www.ct.gov/dob/site/default.asp
Puerto Rico
Commission of Financial Institutions
Fernndez Juncos Station
P.O. Box 11855
San Juan, PR 00910-3855
http://www.cif.gov.pr/index_eng.html
Eric Wilder
Acting Director of Securities
(860) 240-8230
(860) 240-8295 (Fax)
Delaware
Department of Justice
Carvel State Office Building
820 North French Street, 5th Fl. Wilmington, DE
19801
http://attorneygeneral.delaware.gov/consumers/i
nvestmented/
Peter Jamison
(302) 577-8424
(302) 577-6987 (Fax)
District of Columbia
Department of Insurance, Securities and
Banking Securities Bureau
810 First Street, NE, Suite 701
Washington, DC 20002
http://www.disr.washingtondc.gov/disr/site/defau
lt.asp
Asdrubal Aponte
Director of Enforcement
(787) 723-3131
Rhode Island
Department of Business Regulation
1511 Pontiac Avenue
John O. Pastore Complex Building 69-1
Providence, RI 02920-4407
http://www.dbr.state.ri.us/
Maria D'Alessandro Piccirilli
Associate Director & Superintendent of
Securities
(401) 462-9527
(401) 462-9645 (Fax)
Theodore A. Miles
Associate Commissioner, Securities
(202) 442-7800
(202) 354-1092
(Fax)
51
Florida
Financial Services Commission
Office of Financial Regulation
101 East Gaines Street
200 East Gaines Street The
Fletcher Building
Tallahassee, FL 32399-0372
http://www.flofr.com/
South Carolina
Office of the Attorney General
Securities Division
Rembert C. Dennis Office Building
1000 Assembly Street Columbia,
SC 29201
http://www.scag.gov/scsecurities
T. Stephen Lynch
Deputy Securities Commissioner
(803) 734-4731
(803) 734-3677 (Fax)
Franklin Widmann
Director, Division of Securities
(850) 410-9500
(850) 410-9748 (Fax)
South Dakota
445 E Capitol Avenue
Pierre, SD 57501-2000
http://dlr.sd.gov/securities/
Georgia
Office of the Secretary of State
Division of Business Services and Regulation
Two Martin Luther King, Jr. Drive SE
802 West Tower Atlanta, GA
30334
http://sos.georgia.gov/securities/
Michael Youngberg
Director
(605) 773-4823
(605) 773-5953 (Fax)
Tennessee
Department of Commerce & Insurance
Securities Division
Davy Crockett Tower
Suite 680
500 James Robertson Parkway Nashville,
TN 37243-0575
http://www.state.tn.us/commerce/securities/
Vincent Russo
Interim Assistant Securities Commissioner
(404) 656-3920
(404) 657-8410 (Fax)
Hawaii
Department of Commerce & Consumer Affairs
Division of Business Regulation
335 Merchant Street
Room 203
Honolulu, HI 96813
http://www.hawaii.gov/dcca/areas/sec/
Daphne D. Smith
Assistant Commissioner for Securities
(615) 741-2947
(615) 532-8375 (Fax)
Tung Chan
Commissioner of Securities
(808) 586-2744
(808) 586-2733 (Fax)
Idaho
Department of Finance
800 Park Boulevard
Suite 200
Boise, ID 83712
http://finance.idaho.gov/Securities/Securities.as
px
Marilyn T. Chastain
Securities Bureau Chief
(208) 332-8004
(208) 332-8099 (Fax)
Texas
State Securities Board
208 East 10th Street
5th Floor
Austin, TX 78701
http://www.ssb.state.tx.us/
Benette Zivley
(512) 305-8300
(512) 305-8310 (Fax)
U.S. Virgin Islands
Division of Banking and Insurance
18 Kongens Gade
Saint Thomas, VI 00802
Deverita Sturdivant
Chief of Securities Regulation
(340) 774-7166
52
Illinois
69 West Washington Street, Suite 1220
Chicago, IL 60602
http://www.cyberdriveillinois.com/departments/s
ecurities/
Utah
Department of Commerce
160 East 300 South
2nd Floor
Salt Lake City, UT 84111
http://www.securities.state.ut.us/
Tanya Solov
Director of Securities
(312) 793-3384
Keith Woodwell
Director
(801) 530-6600
(801) 530-6980 (Fax)
Indiana
Securities Division
302 West Washington, Room E-111
Indianapolis, IN 46204
http://www.in.gov/sos/securities/
Vermont
Department of Banking, Insurance, Securities &
Health Care
Administration
89 Main Street
Drawer 20
Montpelier, VT 05620-3101
http://www.bishca.state.vt.us/
Chris Naylor
(317) 232-6681
(317) 233-3675 (Fax)
Iowa
Insurance Division
Securities Bureau
340 E. Maple Street
Des Moines, IA 50319-0066
http://www.iid.state.ia.us/ia_securities_bureau/in
dex.asp
Craig A. Goettsch
Superintendent of Securities
(515) 281-4441
(515) 281-3059 (Fax)
John Cronin
Securities Director
(802) 828-3420
(802) 828-2896 (Fax)
Virginia
State Corporation Commission
Division of Securities & Retail Franchising
1300 East Main Street
9th Floor
Richmond, VA 23219
http://www.scc.virginia.gov/srf/index.aspx
Ronald W. Thomas
Director
(804) 371-9051
(804) 371-9911 (Fax)
Kansas
Office of the Securities Commissioner
109 SW 9th Street, Suite 600
Topeka, KS 66612
http://www.ksc.ks.gov/
Washington
Department of Financial Institutions
Securities Division
150 Israel Road, SW
Tumwater, WA 98501
http://www.dfi.wa.gov/sd/
Aaron Jack
Commissioner
(785) 296-3307
(785) 296-6872 (Fax)
William Beatty
Director of Securities
(360) 902-8760
(360) 902-5024 (Fax)
Kentucky
1025 Capital Center Drive, Suite 200
Frankfort, KY 40601
http://www.kfi.ky.gov/
Shonita Bossier
Director, Div. of Securities
(502) 573-3390
(800) 223-2579
(502) 573-2182 (Fax)
53
Louisiana
Office of Financial Institutions
8660 United Plaza Blvd.
Second Floor
Baton Rouge, LA 70809-7024
http://www.ofi.louisiana.gov/
West Virginia
Office of the State Auditor
Securities Division
Building 1
Room W-100
Charleston, WV 25305-0230
http://www.wvsao.gov/securitiescommission/
Rhonda Reeves
(225) 925-4512
Lisa Hopkins
Senior Deputy Commissioner of Securities
(304) 558-2257
(304) 558-4211 (Fax)
Maine
Securities Division
State House Station 121
Augusta, ME 04333
http://www.state.me.us/pfr/securities/index.shtml
Judith Shaw
Securities Administrator
(207) 624-8551
(207) 624-8590 (Fax)
Wisconsin
345 W. Washington Avenue
4th Floor
Madison, WI 53703
http://www.wdfi.org/fi/securities/
Patricia D. Struck
Administrator
(608) 266-1064
(608) 264-7979 (Fax)
Maryland
200 Saint Paul Place Baltimore, MD
21202-2020
http://www.oag.state.md.us/securities/
Wyoming
Secretary of State
Securities Division
State Capitol, Room 109
200 W. 24th Street Cheyenne, WY 82002-0020
http://soswy.state.wy.us/Compliance/Complianc
e.aspx
Melanie Senter Lubin

(410) 576-6360
(410) 576-6532 (Fax)
Karen Wheeler
Division Director
(307) 777-7370
Massachusetts
Securities Division
One Ashburton Place
Room 1701
Boston, MA 02108
http://www.sec.state.ma.us/sct/sctidx.htm
SEC Addresses: Headquarters,

Regional, and District Offices
Bryan Lantagne
Director
(617) 727-3548
(617) 248-0177 (Fax)
Pacific Region
San Francisco District
Michigan
Conduct Review & Securities Division
Office of Financial & Insurance Services
611 West Ottawa Street, Third Floor
Lansing, MI 48933
http://www.michigan.gov/lara/0,1607,7-15410555---,00.html
Alaska, Arizona, California, Guam, Hawaii,

Idaho, Montana, Nevada, Oregon, Washington
Central Region
Fort Worth District, Salt Lake District
Arkansas, Colorado, Kansas, Nebraska, New
Mexico, North Dakota, Oklahoma, South
Dakota, Texas, Utah, Wyoming
Kevin Clinton
Commissioner
(877) 999-6442
(517) 241-3356 (Fax)
54
Minnesota
Department of Commerce
85 East 7th Place
Suite 500
Saint Paul, MN 55101
http://www.state.mn.us/portal/mn/jsp/home.do?a
gency=Commerce
Midwest Region
Mike Rothman
Commissioner
(651) 296-4026
(651) 296-4328 (Fax)
Connecticut, Delaware, District of Columbia,

Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island, Vermont, Virginia,
West Virginia
Southeast Region
Atlanta District
Alabama, Florida, Georgia, Louisiana,
Mississippi, North Carolina, Puerto Rico, South
Carolina, Tennessee, Virgin Islands
Mississippi
Business Regulation & Enforcement Division
700 North Street
Jackson, MS 39201
http://www.sos.ms.gov/
Tanya Webber
Assistant Secretary of State
(601) 359-9055
(601) 359-9070 (Fax)
Kentucky, Illinois, Indiana, Iowa, Michigan,

Minnesota, Missouri, Ohio, Wisconsin
Northeast Region
Boston District, Philadelphia District
The Securities and Exchange

Commission has twelve offices
across the country:
Missouri
600 West Main Street Jefferson
City, MO 65101
http://www.sos.mo.gov/securities/
SEC Headquarters
100 F Street, NE
Washington, DC 20549
Office of Investor Education and Assistance
(202) 942-8088
e-mail: publicinfo@sec.gov
Matt Kitzi
(573) 751-4136
(573) 526-3124 (Fax)
New York Regional Office

George S. Canellos, Regional Director
3 World Financial Center, Ste 400
New York, NY 10281-1022
(212) 336-1100
e-mail: newyork@sec.gov
Montana
Office of the State Auditor
840 Helena Avenue Helena, MT
59601
http://sao.mt.gov/securities/index.asp
Boston Regional Office

David Bergers, Regional Director
33 Arch Street, 23rd Floor
Boston, MA 02110-1424
(617) 573-8900
e-mail: boston@sec.gov
Lynne Egan
(406) 444-2040
(406) 444-5558 (Fax)
Philadelphia Regional Office

Daniel M. Hawke, Regional Director
The Mellon Independence Center
701 Market Street
Philadelphia, PA 19106-1532
(215) 597-3100
e-mail: philadelphia@sec.gov
Nebraska
Nebraska Department of Banking & Finance
Commerce Court
1230 O Street
Suite 400
Lincoln, NE 68509-5006
http://www.ndbf.ne.gov/index.shtml
Jack E. Herstein
Assistant Director
(402) 471-3445
55
Nevada
Secretary of State
Securities Division
555 East Washington Avenue
5th Floor,
Suite 5200
Las Vegas, NV 89101
http://nvsos.gov/index.aspx?page=6
Miami Regional Office

Eric I. Bustillo, Regional Director
801 Brickell Ave., Suite 1800
Miami, FL 33131
(305) 982-6300
e-mail: miami@sec.gov
Carolyn Ellsworth
Securities Administrator
(702) 486-2440
(702) 486-2452 (Fax)
Atlanta Regional Office

Rhea Kimble Dignam, Regional Director
3475 Lenox Road, N.E., Suite 1000
Atlanta, GA 30326-1232
(404) 842-7600
e-mail: atlanta@sec.gov
New Hampshire
Bureau of Securities Regulation
PO Box 3715
Suite 317A
3rd Floor
Concord, NH 03302-3715
http://www.sos.nh.gov/
Chicago Regional Office

Merri Jo Gillette, Regional Director
175 W. Jackson Boulevard
Suite 900
Chicago, IL 60604
(312) 353-7390
e-mail: chicago@sec.gov
Joseph Long
Director of Securities Regulation
(603) 271-1463
(603) 271-7933 (Fax)
Denver Regional Office

Donald Hoerl, Regional Director
1801 California Street, Suite 1500
Denver, CO 80202-2656
(303) 844-1000
e-mail: denver@sec.gov
New Jersey
Department of Law & Public Safety
Bureau of Securities
153 Halsey Street
6th Floor
Newark, NJ 07102
P.O. Box 47029
Newark, NJ 07101
http://www.njconsumeraffairs.gov/bos/
Fort Worth Regional Office

David Woodcock, Regional Director
Burnett Plaza, Suite 1900
801 Cherry Street, Unit 18
Fort Worth, TX 76102
(817) 978-3821
e-mail: dfw@sec.gov
Abbe Tiger
Bureau Chief
(973) 504-3600
(973) 504-3601 (Fax)
Salt Lake Regional Office

Kenneth D. Israel, Jr., Regional Director
15 W. South Temple Street
Suite 1800
Salt Lake City, UT 84101
(801) 524-5796
e-mail: saltlake@sec.gov
New Mexico
Regulation & Licensing Department
Securities Division
2550 Cerrillos Road Santa
Fe, NM 87505
http://www.rld.state.nm.us/
Los Angeles Regional Office

Rosalind Tyson, Regional Director
5670 Wilshire Boulevard, 11th Floor
Los Angeles, CA 90036-3648
(323) 965-3998
e-mail: losangeles@sec.gov
Daniel Tanaka
Director
(505) 467-4580
(505) 984-0617 (Fax)
San Francisco Regional Office

Mark J. Fagel, Regional Director
44 Montgomery Street, Suite 2600
San Francisco, CA 94104
(415) 705-2500
e-mail: sanfrancisco@sec.gov
56
New York
Investor Protection Bureau
120 Broadway
23rd Floor
New York, NY 10271
http://www.ag.ny.gov/bureaus/investor_protectio
n/about.html
NOTE: A number of offices within the SEC can

also be contacted via electronic mail.
http://www.sec.gov/contact/addresses.htm
Please note that many international securities
regulators may be found at the website of the
International Organization of Securities
Commissions, at www.iosco.org.
Marc Minor
Bureau Chief
(212) 416-8222
57
Booklet Summary
Many Real Estate investors can successfully acquire private lenders and not be
concerned that they are breaking any SEC regulations, because they only need a
handful of private lenders from folks they know to have an adequate amount of
funds for their real estate business. They stay below their states threshold in
dollars and lenders. They give their lenders an informative and accurate
disclosure statement.
For some of my students who are looking to take their business to a higher
levels, they will be required to register with their states SEC office or federal SEC
in order to comply with SEC guidelines because of the number and type of
private lenders they want to work with and the amount of private lending funds
they are looking to raise.
The keys are to make sure you are either exempt or registered and obviously
dont mislead your lender.
Our goal has been to provide information that eliminates the confusion in our
industry about the SEC as it relates to private lending. This is an ongoing effort
and it is our sincere desire that we provide direction to help you become
successful.
E. Alan Cowgill
58

Private Lender SEC Compliance

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Introduction

2071 N Bechtle Ave, PMB 310

Private Lending Newsletter with an SEC Overview

Compliance Flow Chart

Advertising guidelines to find private lenders vary by state.

You cannot use the words Low Risk or Guarantee in your

PRIVATE LENDING MADE EASY NEWSLETTER

Some highlights while working with my attorney:

Topic: What is a security?

Topic: Does that mean private lending may be considered securities?

Topic: What about advertising across state lines?

Topic: What sort of disclosure should I give my private lenders?

Compliance Flow Chart

No filing needed (3H exemption)

Above 10 lenders, must file paperwork

May advertise and Pool

Across state lines offerings

Reg. D Rule 504

Raise up to $1 Million per 12

** Reg. D and Form D are defined later in this manual.

be incorporated in the state where it is offering the securities

STATE EXEMPT TRANSACTIONS

Pre-notification (Notice Filing): The Thirteen States

Ohios 3H Exemption (Example)

Frequently Asked Questions

(Your Company Name) has developed creative home purchase financing

Availability of investment capital from private lenders

Local real estate markets

Competition from other real-estate investment companies, which may offer

Availability of investment-grade properties

Legal and regulatory issues

Costs associated with rehabbing and maintaining properties

The possibility of selling a home for less than it was purchased

The possibility of selling a home for less profit than anticipated

The possibility of a home going unsold for an extended period of time

Unanticipated repair costs

Changing market conditions

Interest rate changes

Potential damage caused by customers

The death or disability of (You or Your Officers)

Potential lack of demand for a property or types of property

The Companys current shareholders equity of [$00.000 or ($00,000)]

Invest in newly purchased residential real estate identified in the

Invest in residential real estate currently owned by the company by retiring

The following information is in summary form, from financial information on the

WILL ALSO INCLUDE ADDITIONAL INFORMATION REGARDING THE

These improvements include:

The Company offers help to our customers by making available a

The Company has also offered, to a number of its customers without a

Total Liabilities and Shareholders Equity:

(Including current liabilities, long-term

IN CONNECTION WITH THE "SAFE HARBOR" PROVISIONS OF THE

Whats the SCOR?

Website Disclaimer (fill in the blank)

This website may contain statements concerning our business, financial

Doing Business Across State Lines

NASAA MEMBER REPRESENTATIVE LIST

Melanie Senter Lubin

SEC Addresses: Headquarters,

Alaska, Arizona, California, Guam, Hawaii,

Connecticut, Delaware, District of Columbia,

Kentucky, Illinois, Indiana, Iowa, Michigan,

The Securities and Exchange