Legal Question in Investment Law in California

Licensing Requirements- Not For Profit Investment Firm

My partner and I are looking at forming a Not for Profit Investment Fund.

The objective of this fund will be to finance environment friendly or socially constructive projects (for/non profit) via microfinancing from investors, pool them using a trust account and apply it for the project. The investors will generate a rate of return based on the performance of the project.

Do we need to apply for Broker Dealer/some other license in CA to perform such transactions?

Regards.


Asked on 1/27/09, 2:57 pm

1 Answer from Attorneys
Daniel Bakondi The Law Office of Daniel Bakondi

Re: Licensing Requirements- Not For Profit Investment Firm

This is a really tight area where you want to be careful. If you call yourself "not for profit" but you give returns, the law may view you as for profit. In law it is the effect that often matters and not what you call something. If you make a mistake, you may have personal liability plus interest for everything you collect, even if you "spent it on projects." I would have to take a look at your business model, operating and other agreements, who your investors are, how you are finding and qualifying them, and so on. You might be able to do a 25102(f) if you have limitations on your investors but you have to be sure. Let me know if you want my help.

Best,

Daniel Bakondi, Esq.

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Answered on 1/27/09, 4:09 pm


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