Kim Lisa TaylorSecurities Attorney, Founder, Syndication Attorneys, PLLC · Corporate Securities Attorney, 2x Best-Selling Author, Nationwide Speaker | Private Placement

Legal Insights on Raising Money in Syndications

24 Jul 2024 · 1 min

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In this segment, the speaker emphasizes that while all members of management should be involved in raising capital for a syndication, they must not receive separate, transaction‑based compensation unless they hold the appropriate securities broker‑dealer license. Paying such compensation without a license is illegal and triggers a shift from a standard syndication framework to a heavily regulated broker‑dealer pathway, which is costly, time‑intensive, and burdensome to maintain.

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Everyone in management should be raising money, and— but nobody should be separately compensated for raising money because it's illegal to pay transaction-based compensation to anybody who is, and you can't pay that to anyone that doesn't have a securities license. And that's usually a securities broker-dealer license, which is very, very difficult to get. And very, very costly and time-intensive to maintain. It's because you are now going down a road that's going to be very different than a syndication path, and it's going to be a very regulatory burdensome path to take.