In this attorney‑led Q&A, the speaker addresses Cindy’s query about the line between permissible advertising and fraudulent statements in securities or investment offerings. The attorney explains that anti‑fraud regulations are broad and prohibit any promissory language, such as using the word “guarantee” or promising specific returns. He warns that statements like “we make quarterly distributions” can become fraudulent if the distributions are later suspended, turning the promise into a lie. To avoid liability, the attorney recommends phrasing such claims more cautiously—e.g., saying distributions are “scheduled” or “evaluated quarterly”—and attaching clear disclaimer language that distributions are not guaranteed and may be suspended at the manager’s discretion. He also emphasizes that outlandish promises cannot be rescued by fine‑print disclosures; the mere act of making a false promise is itself a fraudulent statement.
Chapters
Cindy asked advertising versus fraud. That was the topic in the email registration. Okay, that's very good. Happy to answer the questions about that. So advertising versus fraud. So whenever you are involved in a securities offering, well, or any kind of an investment scheme, right, where somebody's going to be investing money and you're asking them through a public forum to be able to invest with you. Then you are going to be subject to anti-fraud rules, and the anti-fraud rules are very, very broad, and they're going to prohibit you from using any kind of promissory language. So you cannot use the word guarantee in connection with a securities offering. That's going to be a huge red flag for regulators. You want to be really careful about the way you say things. So you know, you may be familiar with attorneys. You know, whenever you ask a question, we always say. It depends, or we say something like, oh well, we need to know more, or you know, put this disclaimer on it, or something like that. But really, what we're talking about is if you want to make a claim like we make quarterly distributions, well, that could easily become a fraudulent statement because what if you can't? What if you have to suspend? Spend distributions, and now you didn't make a quarterly distribution. Now you're a liar. Okay? In the eyes of that investor, you have lied. You've made them a promise that they were quarterly going to receive a check, and now they didn't. So what you would say instead is we schedule them, or we evaluate distributions quarterly. We schedule them quarterly, and then we would have some disclaimer language at the bottom of that ad that would say quarterly distributions are not. Guaranteed, may be subject to suspension at the manager's discretion or something like that. So we would come up with the appropriate disclaimer that disclaims that. One thing you need to be aware of though, is if you make outlandish statements, you cannot later say, oh, well, you know, that's not what I really meant with a disclosure. You know, hey, we promise you 19% returns. And then at the bottom say, well, it's not really a promise. That doesn't cure it. The fact that you made the promise itself is going to be the fraudulent statement that's going to get you in trouble.
