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These platforms can be provided by financial institutions, such as banks and brokerages.

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These platforms can be provided by financial institutions, such as banks and brokerages, or by technology companies and fintech firms.

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How to Remain Compliant When Launching a Fund

A fund is a great tool to raise capital for your projects, buttarting a fund comes with responsibility as well. If you’re anything like most of our fund managers, you’ve probably already started thinking about compliance and legal issues. 

After all, non-compliance can be a serious problem, leading to legal troubles, heavy fines, and other consequences for your business.

Here’s a crash course on key compliance considerations crucial to bear in mind when launching a fund:

1. Decide if You Want to Take Accredited or Non-Accredited Investors

Do you plan to raise capital from accredited investors, non-accredited investors, or both? The answer to this question will help you choose between launching a 506(b) or a 506(c) fund under the Regulation D exemption, which is the most popular fund exemption for new capital raisers. 

If you decide to launch a 506(b) fund and accept capital from non-accredited investors, make sure you have a pre-existing relationship with those investors. You also cannot publicly advertise your fund. 

Learn about the difference between 506(b) 506(c) and the different capital raising exemptions

Keep in mind that Avestor supports both 506(b) and 506(c) funds, so we can work with whichever structure you choose! 

2. Complete All Necessary State and Federal Filings 

Even if you’re creating an exempt offering, you still need to file notification with the Securities and Exchange Commission (SEC). The filing is called a Form D. 

If you work with Avestor, our team of attorney partners will handle this for you.

You’ll also need to complete state filings for every state where you take investor capital. Avestor makes it easier than ever by taking care of these filings for you.

Learn about all the features included in your Avestor Customizable Fund

3. Find Out if You Need to Become an Exempt Reporting Advisor

While managers of small, private funds don’t need to register with the SEC, they may still need to register in the state they are operating in. The rules can vary depending on your state. 

Take time to research your state laws around Exempt Reporting Advisors, and when in doubt, consult an attorney to ensure you’re staying compliant. 

If you do need to become an ERA or a Registered Investment Advisor, Avestor can help with that, too. We’re able to offer our fund managers highly discounted rates on these registrations. 

4. Run KYC and AML Checks on All Investors

Before you accept capital from a new investor, make sure to first run “Know Your Customer” and “Anti Money Laundering” checks. These will help you make sure no laundered money is being invested into your fund.  

Avestor’s online registration process automatically performs a KYC/AML check on all of your investors and if anything shows up, we will immediately notify you.

5. Hire a Great Securities Attorney 

You don’t have to be a legal expert to raise capital, but you do need to have a great securities attorney on your team. 

Finding an attorney you can trust will be an important part of starting a fund. Most of the time, a great attorney is not the person that spends all their time on the podcast circuit or creating Youtube videos to garner more business. 

Fortunately, you don’t have to do it on your own. When you launch your fund with Avestor, we give you the opportunity to work with one of our vetted legal partners, who will help you with everything from creating your PPM to completing all necessary filings. 

And while we hope compliance will never become an issue for your business, think how much better you’ll feel knowing you have an expert in your corner! 

To learn more about launching a Customizable Fund on Avestor’s platform, visit to schedule a free strategy call, or join our next product webinar!  

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