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

Not an Exception

11 Aug 2026 · 2 min

Watch on YouTube

1:30

In this brief presentation, the speaker clarifies that raising capital from friends and family does not constitute an exemption from securities law; it remains a securities offering governed by Regulation D Rule 506. The rule permits fundraising from a pre‑existing network without public advertising, but it imposes strict requirements: no general solicitation, a substantive pre‑existing relationship with each investor, and proper documentation. Up to 35 non‑accredited investors may participate if they are sophisticated, and the issuer must demonstrate knowledge of their sophistication before the offer. Despite the personal connection, the issuer must still conduct suitability conversations, prepare a private placement memorandum (PPM), and maintain documentation. The speaker warns that these protections can break down when the investment is transferred to heirs, ex‑spouses, trustees, or other parties not originally vetted, creating risk for the issuer. The video references a longer‑form explanation covering three detailed scenarios, linked in the bio.

Chapters

Raising money from friends and family is still a securities offering. Friends and family is not an exemption from the rules. It's a description of who qualifies under a specific rule. That rule is Regulation D Rule 506. It's the provision under Regulation D that allows you to raise from a preexisting network without public advertising. It has requirements: no general solicitation, You must have a preexisting substantive relationship with each investor, and it has to be documented. And you can include up to 35 non-accredited investors, but only if they're sophisticated. And you have to be able to show that you knew that before you made the offer. The fact that these are people you know gets you partway there. You already have the preexisting relationship. You don't need to advertise. But it doesn't replace the documentation. It doesn't replace the suitability conversation. It doesn't mean you don't need a PPM, and it doesn't protect you once the investment shifts from the original investor to the next generation. Their heirs, their ex-spouses, trustees, people you never chose to be in business with and who don't share all of the goodwill you've built with the original investor. Exactly where that breaks down, there's 3 scenarios explained in the long form. See the link in the bio.