Capital raisers face scrutiny from the SEC and all 50 state securities agencies, each able to assert jurisdiction over offerings in their state. Non-compliance can result in industry bans, being labeled a bad actor, and reputational damage that cripples future fundraising.
And it's not just the SEC that might be looking at what you're doing. There are 50 state securities agencies, each of who could look at you. If you have investors in those states, then they have jurisdiction over you and your offering. They can start looking at all of your advertising and everything that you're doing. Also, you have threats from disgruntled investors. If you bring your investors into a deal, that deal happens to fail, then, you know, your investors first look at you. Well, you're the one that brought me to the deal. It starts to cascade and you could get caught in the middle there. The ramifications for doing it wrong are you could be banned from the industry, never raising capital again. You could be labeled a bad actor. You could be labeled as unregistered investment advisor. You could just, you know, not be able to continue the way you're doing because your reputation is instantly maligned. And from then on, you're always going to have to talk about the fact that, hey, I got in trouble for this and here's how I worked it out. But it's a stain on your record.
