The History of Securities Registration and Regulation

There are some things that all people love. 

We all love a great deal. We all get excited at the potential of winning big. We all fancy the idea of being an insider.

And at FundRebel, we love breaking rules. Pushing buttons. Raising bars. 

But we’re all about protecting money and fair deals. All our funds are qualified by the SEC.

SEC Certification and the History of Securities Registration and Regulation

Back in the day, the only people who invested were the utterly wealthy. With no regulations or guarantees and a whole lot of risk, only those rich enough to handle the risk that they were assuming ended up investing. It was the wild west of the investing world, and largely inaccessible to most. 

As the United States stock market grew and became important to the economy, the government began taking notice of the Americans generating larger incomes and looking to invest money. The Blue Sky Laws enacted in 1911 were state-to-state basic disclosure laws, intended to be a layer of protection for investors against worthless securities. They required companies to deliver a prospectus outlining details of the deal, regardless of if it were fair or not. 

As investing became more and more attractive to Americans, the lack of solid regulatory laws paved the way for manipulation and fraud. Not only brokers and owners, but also banks, colluded with each other on insider trading of shares to artificially raise prices before opening them up to the public, and between 1921 and 1929, stock prices went up nearly 10 times. It all came to an abrupt end with the stock market crash of Black Tuesday on October 29, 1929, depleting the stock market of $30 billion of value and triggering the beginning of the Great Depression.

This made the government really sit up and pay attention to the stock market. In 1933 The Glass-Steagall Act was established to prevent banks from playing in the stock market, essentially keeping commercial banking separate from investment banking. This was shortly followed by the institution of the modern-day Securities and Exchange Commission (SEC) in 1934 as one of Franklin D. Roosevelt’s New Deal programs. From this point on, the SEC was given power to regulate the entire securities industry including the stock exchange and to file charges against violators. 

The Importance of SEC Regulation

The SEC is responsible for bringing stability and transparency to the investment market. It is tasked with ensuring that people are treated fairly and given important investment information. According to the SEC, they, “...require public companies, fund and asset managers, investment professionals, and other market participants to regularly disclose significant financial and other information so investors have the timely, accurate, and complete information they need to make confident and informed decisions about when or where to invest.” Generally, most securities sold in the United States must be registered, and they are made public shortly after filing.

The Institution of Regulation A

With the year 2015 came the SEC’s Regulation A, giving permission to companies to use equity crowdfunding to offer and sell their securities and offering exemption from some of the stringent SEC registration requirements. They still must file their offering with the SEC and submit an offering circular. Regulation A is broken into two tiers: Tier 1 (for securities offerings of up to $20 million in a 12-month period) and Tier 2 (for securities offerings of up to $75 million in a 12-month period). With Tier 2 offerings, companies must file continual reports and limit the amount of money a non-accredited investor can invest.

Understanding the FundRebel Investment Structure 

The premise for FundRebel is an all-access, open invitation of real estate investing to the average American worker. FundRebel investment funds are each their own freestanding legal entity. Every time we launch a new fund, as the sponsor, FundRebel LLC will file a new SEC process (our flagship investment opportunity, FundRebel Dean, is already open for share purchase until it reaches the $75 million cap). Regulation A offers us the flexibility to invite everyone to the investment table with as little as a $1000 minimum investment (plus, no fees!), and to deliver even more value through a  secondary marketplace. Our investment opportunities are attractive to all kinds of buyers, offering accessibility, liquidity, flexibility, and direct ownership in properties that can grow portfolios and change wealth.

Join us in pioneering the new landscape of real estate investing for the average American. With our multi-fund investment platform of Tier 2 Regulation A+ offerings, FundRebel Dean is just the beginning of the non-wild west of commercial real estate investing.