

Ask HN: Door-to-Door Selling Stock to Fund your Company? - DanielBMarkham

I was talking to my cousin last night, and he's formed up a partnership to get into green energy (I won't bore you with details) He said they had a large funder which they rejected because the guy was just too hands-off.<p>He mentioned something in passing, though, which bugged me. He said that he had found another funder who was willing to pay x dollars just for the opportunity to sell stock in his company in the local area.<p>This set off an alarm. Isn't it illegal to sell/trade a non-traded stock? If not, where do you draw the line? I remember reading about various ponzi schemes and such and the reason why the SEC was formed. Is it still possible to just go door-to-door and fund your company? If so, what are the worries in doing that?
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aasarava
It's not necessarily illegal to sell shares in a private company, but you're
right that the manner in which you do it is highly regulated. See "Rule 502",
in particular clause C. <http://www.law.uc.edu/CCL/33ActRls/rule502.html>

This summary addresses your question directly (albeit in a footnote):
[http://www.icemiller.com/enewsletter/Bulletins/PEN/5Gen_Soli...](http://www.icemiller.com/enewsletter/Bulletins/PEN/5Gen_Solicit_PEN.htm)

 _"Issuers are not permitted to solicit ... investors where it is not known
whether or not they are accredited -- even if only accredited investors are
actually allowed to invest."_

Seems that going "door to door" would violate that rule.

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DanielBMarkham
Thanks! Great links!

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ScottWhigham
_they had a large funder which they rejected because the guy was just too
hands-off_

Huh? Doesn't seem logical to me. Too hands-on, maybe, but turning down money
b/c some investor trusts the people he invests in just doesn't make any sense.

As for your query, of course there are huge, huge legal worries here. As a
friend once told me, "The IRS is a kitten compared to the SEC. Don't #### with
the SEC." Not to mention that no future investor will want anything to do with
said company.

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lowkey
"Don't #### with the SEC." > unless you are a hedge fund, investment bank, or
other financial institution working on obscene leverage anywhere from 8:1 up
to 30:1. Then the SEC treats you with kid gloves (thinly veiled sarcasm)

