Broken Window SEC Raising Money

“Ordinarily, I’d take you in my court and try you and hang you.”

Judge Roy Bean

What do broken windows have to do with real estate investors?

Under the new SEC chairwoman, it seems more than just more rehab costs! Knowing the line between what is not and is a security goes along way for most investors. If you raise private money or seek joint venture partners I encourage you to review the rules for raising private money and ensure great record keeping. The new policy of aggressive enforcement likely is a result of several factors. First, the public outrage at the Bernie Madoff Ponzi scheme, and second some aggressive changes that flow from the JOBS act put tremendous strain on the SEC. They have elected to come out swinging!

#1. The New Sheriff in Town

SEC chairwoman Mary Jo White took the rains over at the SEC in April of 2013. Amidst all of the changes in the flow from the JOBS Act, she recently announced a new enforcement attitude in a speech in October. I think anyone raising money for any reason needs to take heed.

Consider her remarks:

“…Instead, they want someone who understands that even the smallest infractions have victims, and that the smallest infractions are very often just the first step toward bigger ones down the road.

They deserve an SEC that looks at its enforcement mission in exactly that way.

This approach is not unlike the one taken in the nineties by then New York City Mayor Rudy Giuliani and Police Commissioner Bill Bratton, back when I was the United States Attorney for the Southern District of New York.

They essentially declared that no infraction was too small to be uncovered and punished. And, so the NYPD pursued …read more