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SEC Questions Answered- Part 1 | By: Alan Cowgill

SEC Questions Answered- Part 1 

 While speaking all over the nation, meeting thousands of real estate investors the past few years and getting asked questions on the SEC, I realized that there is a lot of confusion concerning SEC regulations as it applies to private lending.

 The confusion seems to arise because of the following:

1)      Each state establishes their own regulations and exemptions.  Therefore there are different guidelines depending on where you live.

2)      If you cross state lines with your private lending, i.e. houses in one state and lenders in another, the Federal SEC regulations come into play.

3)      There are a lot of half truths floating around and when people hear these, they get confused and possibly fearful.

 To be better equipped to answer everyone's questions, I decided to hire an attorney to do some research.  What I found was that each state is able to establish their own regulations, but they all have the same pattern.  So I’ll use my state of Ohio as a model to explain what is typical for nearly all states.

1)      In Ohio I can acquire up to 10 private lenders without having to file any paperwork with the state division of the SEC.  Once I file the proper paperwork my number of lenders is unlimited. Different States have different numbers and most are higher than Ohio.

2)      As long as my properties and lenders are in Ohio.  Just the state regulations apply.  If I have lenders and or houses in different states then the Federal SEC regulations apply.

3)       If I go over 10 lenders, the paperwork I need to file with the state can be fairly simple.  But I’ll want to hire an SEC attorney skilled in filing.

4)      I need to give a disclosure statement to potential lenders.

5)      Can't pool lender money but I can if I file the proper paperwork.

6)      Can NOT use the word 'guarantee' in my advertising.  That would be misleading private lenders and considered FRAUD.

 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.  In many states, they are very willing to help you if you just ask.  They just want you to comply with their regulations.


 Alan Cowgill is a speaker, author, and real estate entrepreneur.  His step-by-step system “Private Lending Made Easy” teaches others to find private lenders

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