What’s the real cost of raising capital without knowing the rules—and why could one wrong move unravel your entire deal?

In this episode, securities attorney Dugan Kelley breaks down the often misunderstood legal frameworks behind raising private capital through syndication. With over $4 billion in structured transactions under his belt, Dugan offers a clear overview of how to legally structure offerings under SEC rules—especially Rule 506(b) and 506(c)—and the serious risks of getting it wrong. He unpacks what it means to be an issuer, the importance of broker-dealer registration, the difference between accredited and sophisticated investors, and how new developments like Rule 241 offer flexibility when testing investor interest.

[00:01 - 05:12] Understanding the Issuer Exemption

• The importance of identifying whether it's truly your deal
• Why the issuer exemption protects you from broker-dealer registration
• The need for co-sponsors to play active roles—not just raise funds

[05:13 - 09:20] Rule 506(b) vs. 506(c): What’s the Difference?

• Why 506(b) is the historical path and what it allows
• The significance of 506(c)'s advertising freedom—and its investor limitations
• What the SEC requires in each case

[09:21 - 13:36] Accredited Investor Verification Rules

• What the SEC expects for 506(c) accreditation proof
• Why personal relationships matter in 506(b) offerings
• The importance of third-party verification letters from CPAs, attorneys, or broker-dealers

[13:37 - 17:00] Rule 241 and Testing the Waters

• How sponsors can gauge investor interest before choosing 506(b) or 506(c)
• What disclaimers are legally required during this phase
• Why soft commits during this stage are non-binding

[17:01 - 21:35] Unregistered Finders and Legal Risks

• The significance of avoiding unlicensed capital raisers
• Why deals can be canceled due to regulatory violations
• The importance of complying with both federal and state securities laws

Connect with Dugan:

LinkedIn: https://www.linkedin.com/in/dugan-kelley-0019b435/

Key Quotes:

“Don’t lie, don’t cheat, don’t steal, and share the same information with all your investors.” - Dugan Kelley

“You can do this. If you build relationships and follow the rules, anyone can succeed in syndication.” - Dugan Kelley

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