Crowdfunding Offers Increased Investment Choices

NEW YORK CITY-A small change in the federal securities laws contained within  the Jumpstart Our Business Startups Act and for which the Securities and Exchange Commission  proposed a new Rule 506(c) under  Regulation D on Aug. 29, 2013 will change the way in which real estate investments are sold and financed because it allows for the nationwide advertising and sale of interests in real estate and mortgages without the need for the sponsor to register the offerings with the SEC.  The Jobs Act and Rule 506(c) suggest that it does not matter whether the real estate is a security if it is only sold to accredited investors.

Previously, the sale of investments in real estate where someone else was making the decisions were considered securities and, except for limited exemptions, the sponsor would be required to go through the time and expense of a filing with the SEC and complying with the subsequent reporting requirements for public companies, which made it very difficult for investors to invest in single properties. The JOBS Act provided relief from these marketing limitations because  it permits sponsors to treat the real estate interests as securities, that do not need to be registered with the SEC (other than submitting a simple Form D).