For many professionals, the mention of DFI (Department of Financial Institutions) or SEC (Securities and Exchange Commission) can elicit anxiety or trepidation. However, the primary role of these regulatory agencies is to bring order, structure, and transparency to institutions and consumers alike.
The investing world is as fascinating as it is complex, and it can be very lucrative, and very risky. It differs from the banking world, where deposits are guaranteed by the federal government, FDIC (Federal Deposit Insurance Corporation insuring deposits up to $250,000.00). Investments can lose value, or gain substantial value, and one thing you can take to the bank is that there are no guarantees. That’s why investing is not a spectator sport. We’ve all heard the stories of volatile stock market crashes that result in substantial drops in value in just a few hours of the market opening.
In the midst of investment volatility, companies have three needs that are paramount to success; 1) Capital 2) Cashflow (Revenue), and 3) Management. The SEC is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation that companies require to grow and operate effectively. This structured governance establishes a framework that benefits both the issuer (companies providing investment opportunities) and the user.
The ideal way for investors to protect the money they put into the securities markets (any investment in public markets, or private equity markets) is to do research and ask questions. According to the SEC website (www.sec.gov) it is stated,
“The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it.”
To secure this, the SEC requires public companies to disclose meaningful financial and other information to the public. This also extends to private companies, through Regulation A, D, and a series of other rules specific to the nature of a firms capital raising efforts.
Only through the flow of timely, comprehensive, and correct information can people make sound investment decisions.
At the state level, DFI works in tandem with the SEC in monitoring investment advisors and issuers to ensure compliance of governmental regulation and state imposed overlays. For Washington State, DFI’s mission statement cites,
“DFI regulates financial services to protect and educate the public and promote economic vitality.” (www.dfi.wa.gov)
Furthermore, in the departments WA Strategic Plan (2019-2021) it is written that their objective is to:
- “Maximize efficiencies and minimize the onsite impact to regulated entities.”
- “Require corrective and remedial action when regulated entities reach a weakened financial condition, are engaged in unsafe or unsound practices, or violate laws.”
This cooperative approach with the issuers of securities (investment providers) maintains the DFI Value: Fairness and respect for individuals and institutions.
As an issuer of securities, we navigate the scrutiny of regulation, and have created a team of advisors and counsel to ensure our firm is taking the appropriate steps necessary to grow in a sustainable way. We are aligned with the governing agencies in the enforcement of regulations that protect consumers from inappropriate or predatory behavior.
Within the landscape of real estate investing, too many consumers fall prey to the offerings of loose partnerships and noncompliant investment opportunities that fail to secure the appropriate regulation filings required.
If you have questions as to whether or not a real estate investment you’re been offered may be structured appropriately, we are happy to refer you to our team of professionals.
It is our objective to bring awareness to the real estate investment industry on the importance of proper structuring of any investment offering.
-Blake E. Robbins