Legal Ins and Outs of Crowdfunding

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When crowdfunding first emerged, Attorney Anthony Zeoli was skeptical of online real estate investing. "When you start dealing with securities and the legal side of things," explained Zeoli, "a lot of things can go wrong if not executed correctly." Although concerned that crowdfunding's lack of best practices could create a slew of legal challenges, he recognized the industry's potential to become a significant force in real estate capital raising. In hopes of developing a more regulated structure, Zeoli immersed himself in the industry, including participating on the "Legal Ins and Outs of Crowdfunding" panel this week at RealCap Chicago.

RealCap brings together investment crowdfunding leaders and innovators to collaborate and share ideas that may advance this expanding industry. Crowdfunding, especially those opportunities open to non-accredited investors, has broadened investment possibilities to many who previously could not participate. To propel the industry's progress, American Homeowner Preservation and Small Change will host RealCap Chicago on Thursday, September 29th.

Zeoli explains that the process of streamlining crowdfunding's legal structures is underway and involves adapting traditional investment rules to online platforms. "We are working on acquainting new rules to a series of old rules that were never designed for the Internet, such as general solicitation," said Zeoli. He stresses the importance of teamwork among crowdfunding leaders in order to bring structure to legal procedures. "We all work with and learn from each other to develop best practices," he explained.

In 2012, President Obama enacted the Jumpstart Our Business Startups Act," known as the "JOBS Act." Title III (Regulation Crowdfunding) and Title IV (Regulation A+) of the Act allow non-accredited investors access to alternative investments through equity crowdfunding. Zeoli asserts that non-accredited investors should not be considered less knowledgeable or sophisticated than accredited investors when interacting with crowdfunding platforms. "I don't like treating non-accredited investors any different than accredited investors," said Zeoli. "I think they should have the same opportunities that accredited investors have, and should be able to make their own investment decisions." Though Zeoli acknowledges investment risks, he stresses the importance of allowing non-accredited investors to participate in risky deals if they feel informed and capable. "It's no different from a person being able to decide for themselves if they want to go to a casino," Zeoli asserted. "They don't need their hands held."

At RealCap, Zeoli will be joined by Mark Roderick of Flaster Greenberg, Georgia Quinn of iDisclose, Eve Picker of Small Change, Scott Purcell of FundAmerica, and Mark Lancaster of Great Lakes Fund Solutions. Zeoli commends crowdfunding's success at connecting developers with reliable sources of capital and allowing investors access to stakes in new and small businesses. He envisions a bright future for crowdfunding and regards it as "the new go-to for real estate investment."