What’s the real risk behind accepting investor referrals—and what could cost you hundreds of thousands without you realizing it?

In this episode, Dugan Kelley clarifies the rules around raising capital under the 506(b) exemption. He breaks down what counts as general solicitation, when a preexisting relationship is required, and how word-of-mouth referrals can create unexpected liability. They also address growing confusion around registered broker-dealers, finder’s fees, email marketing boundaries, and the future of accreditation rules. If you’ve ever questioned how to stay compliant in your real estate syndication or capital raise, this conversation gives practical guidance to protect yourself and your investors.

[00:01 - 05:49] The Broker-Dealer Dilemma

• Why only registered broker-dealers can legally accept commissions
• What most people misunderstand about co-sponsors and cap-raising roles
• The importance of avoiding unnecessary regulatory exposure

[05:50 - 09:35] The Truth About 506(b) & Referrals

• Why preexisting relationships matter—but aren't always required
• What the SEC actually says about general solicitation
• The significance of documentation in defending your offering

[09:36 - 13:25] Finders, Word of Mouth, and the “Paul Anka Rule”

• What the limited finder’s exemption really allows
• The importance of avoiding indirect solicitation
• Why most operators avoid referral-based models

[13:24 - 17:23] Email Lists, Accreditation Rules & SEC Trends

• When it’s safe to email your list about deals
• The unlikely future of a $10 million net worth accreditation rule
• The importance of understanding the SEC’s slow pace of change

[17:24 - 22:44] When to Move from 506(b) to 506(c)

• Why most operators stick with 506(b) early on
• What to consider when transitioning to 506(c)
• The importance of knowing your investor base

Connect with Dugan:

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

Key Quotes:

“There is no such thing as a professional referral unless the professional is a registered broker-dealer.” -Dugan Kelley

“You have the burden to prove you didn’t solicit someone—even if they were referred to you.” - Dugan Kelley

Visit sponsorcloud.io/contact today and unlock $2,000 of free services exclusively for REI Rocks community members! Get automated syndication and investor relationship management tools to save time and money. Mention your part of the REI Rocks community for exclusive offers. Help make affordable, low-cost education summits possible. Check out Sponsor Cloud today!

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

Visit sponsorcloud.io/contact today and unlock $2,000 of free services exclusively for REI Rocks community members! Get automated syndication and investor relationship management tools to save time and money. Mention your part of the REI Rocks community for exclusive offers. Help make affordable, low-cost education summits possible. Check out Sponsor Cloud today!

What do most new investors overlook when raising capital, and how can a single missing document expose the entire deal?

In this episode, Dugan Kelley breaks down the legal side of raising money for real estate deals, especially under Rule 506(b) exemptions. Dugan shares a clear, actionable breakdown of the syndication process, how securities laws apply, and the key legal structures every investor should understand. With over $4 billion in structured transactions under his belt, he walks through the must-have documents, how to avoid legal pitfalls, and the significance of understanding the difference between accredited and sophisticated investors. Whether you're syndicating your first deal or investing passively, this episode outlines what you need to know to stay compliant and protect your capital.

[00:01 - 05:42] Syndication Basics: What Are You Selling?

• The importance of understanding whether you're selling a security
• Why real estate syndication usually involves securities law
• The role of passive investors and operator equity in typical deal structures

[05:42 - 10:53] Securities Law 101: Are You in the SEC’s Jurisdiction?

• What defines a security in real estate transactions
• Why even small deals may trigger SEC oversight
• The need for a Private Placement Memorandum (PPM) in most syndications

[10:54 - 15:27] The Six Ingredients Every PPM Must Have

• What the SEC expects in a compliant real estate offering
• The importance of risk disclosures, business plans, and subscription agreements
• Why a company agreement governs everything after the close

[15:28 - 20:33] Who Qualifies to Invest: Accredited vs. Sophisticated

• What makes someone an accredited investor (net worth or income thresholds)
• How recent SEC updates have expanded access to more people
• The significance of entity-based accreditation

[20:34 - 24:05] Sophisticated Investors: A Gray Area You Need to Understand

• What defines a sophisticated investor and how to evaluate suitability
• Why Rule 506(b) limits the number of these investors to 35
• The risk tolerance, intent, and understanding needed to qualify

Connect with Dugan:

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

Key Quotes:

“If your purpose is to raise capital and the buyer’s purpose is to receive a profit, you’re selling a security.” — Dugan Kelley

“If your deal is missing a company agreement or key disclosures, that’s a red flag—don’t invest.” — Dugan Kelley

Visit sponsorcloud.io/contact today and unlock $2,000 of free services exclusively for REI Rocks community members! Get automated syndication and investor relationship management tools to save time and money. Mention your part of the REI Rocks community for exclusive offers. Help make affordable, low-cost education summits possible. Check out Sponsor Cloud today!