Syndication Securities FAQ for Sponsors

This page answers the securities questions sponsors ask most often when they raise money for an apartment deal. Each answer is short. Follow the link for the full explanation and the sources. Nothing here is legal advice, and the answers assume a typical U.S. syndication.

1. Is a syndication interest a security?

Usually yes. An interest in an LLC or limited partnership that a sponsor manages, bought in the hope of profit from the sponsor's work, is generally treated as an investment contract under the test from SEC v. W.J. Howey Co. (1946). The definition of a security in Section 2(a)(1) of the Securities Act of 1933 lists "investment contract" among other instruments. That is why a raise needs an exemption or a registration. See what is Regulation D.

2. Do I have to register the offering with the SEC?

Not if you rely on an exemption that fits the raise. Most apartment syndications use Regulation D, and Rule 506 is the usual choice. A registered offering is a much larger undertaking and is not the typical path. Compare the two main paths in 506(b) vs. 506(c).

3. Can I advertise a 506(b) deal?

No. A Rule 506(b) offering may not use general solicitation, which covers public advertising, posts and mass email aimed at people who are not already known to the sponsor. A 506(c) offering may advertise, but it must take reasonable steps to verify that every investor is accredited. See what is general solicitation and accredited investor verification.

4. Do all my investors have to be accredited?

Not under Rule 506(b). Up to 35 non-accredited investors may buy, but each must be sophisticated, and Rule 502(b) then requires a disclosure package. Under Rule 506(c), every investor must be accredited. See the accredited investor definition.

5. When is Form D due?

Within 15 calendar days after the first sale. The clock starts when the first investor is irrevocably committed to invest, not when the deal closes. The SEC charges no fee for the filing. See Form D filing.

6. Can I promise investors a return?

No. A sponsor may show projections and explain how returns are calculated, but may not guarantee a return or describe a projection as certain. Every projection needs its assumptions stated. Read syndication financial projections before you share one.

7. Can I pay someone to find investors?

Be careful. Paying an unregistered person for introductions to investors can raise broker-dealer questions. Each payment and each person needs a review by a securities attorney. See paying capital raisers.

8. Do state rules still apply if the offering is federal?

Yes, in part. Rule 506 offerings are covered securities, so a state cannot require registration of the offering itself. Most states still require a notice filing and a fee, and some states have their own antifraud rules. See blue sky notice filings.

It can. Rule 506(d) disqualifies an offering when certain covered persons, including sponsors and certain officers and large holders, have a disqualifying event. The sponsor must check for these events before the raise. See the bad actor rule under Rule 506(d).

10. Can I start raising from my followers?

Only under the rules that fit each investor. A 506(b) raise to followers needs a pre-existing substantive relationship, and it must not be advertised. A public audience generally means 506(c) with verification. See can followers invest under 506(b).

What to do next

Write down the exemption you plan to use, the investors you expect and the states they live in. Give that list to your securities attorney before you open the raise. A short review at the start is cheaper than a correction after the first sale.

Sources

This article is general information as of October 2026, not legal, tax or investment advice. Securities rules depend on the facts of each offering and each state, so confirm your plan with a securities attorney. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.