b'Trust Deed v. Fund Investment continued from page 31California Business & ProfessionsThere are no more than 10 investorsand obtains more investor funds for Code Section 10237 and Californiasecuringthefractionalizedfractionalized interests and whole note Corp Code Section 25102.5: interests; investments.This creates a new issue: how The rights of these investorsfar can the Issuer rely on state exemptions?California has a unique real estateare identical in terms, including investment exemption for real estateforeclosure rights, interest rate,One-off transactions (or limited transactions) brokers issuing securitiesCaliforniaetc.; and appear to be the target of these limited Business & Professions (B&P) Codestate securities exemptions.However, Section 10237.The broker-issuer mustLoan-to-value ratios comply withwhen multiple deals with numerous have a California real estate brokersSection 10238(h).investors across the United States come into license from the California Departmentplay, there is a higher risk of violating state of Real Estate, and must generallyIn addition, because California lawsecurities laws.The Issuer must conduct comply with the following:governs this transaction, the realdue diligence in any state an investor File a notice provided in Business &estate broker cannot rely on thisresides to determine whether the Issuer is Professions Code Section 10238(a)exemption in the event an investorin compliance with the securities laws that within 30 days from the date ofresides outside of California. Allstate.Along with the possible integration closingtransactionsinvestment funding,doctrine that may be applied, establishing loan closing, real property location a fund is likely the proper route to take.Ensure advertising complies withmust be conducted in California. California law;INDIRECT INVESTMENTSReal property securing the interestsLimitations on FUND INVESTMENTS:is located in California; State ExemptionsNotes or interests must be sold byOn a long-term basis, investments by way As an Issuer gains additional experienceof establishing a fund would be more or through a real estate broker; and positive reputation among investors, word travels and the Issuer gains tractioncontinued on page 33Page 32Fall 2019Points of Interest'