This matter involves a settlement with DF Growth REIT II, LLC (the “Trust”) relating to the Trust’s purported reliance on the Regulation A exemption from registration under the Securities Act of 1933. The Order[1] finds that the Trust failed to comply with the requirements of Regulation A, including Rule 251(d)(3)(i)(F), which governs continuous offerings under the exemption. I write separately to express my view that the Order, while expressing sufficient facts to support a violation of this rule, should not be read as expanding the requirements of the rule.

The Order quotes Rule 251(d)(3)(i)(F) that “[c]ontinuous…offerings may be made under…Regulation A, so long as the offering statement pertains only to…[s]ecurities the offering of which will be commenced within two calendar days after the qualification date…”[2] To support the conclusion that the Trust did not satisfy this requirement, the Order cites to the Trust’s semi-annual report filed approximately five months after the qualification date. According to the Order, the Trust had stated in this report that it had not yet commenced its operations or sold any LLC interests under Regulation A, but that it “plans to begin raising money…[at a future time].”[3] Notably, the Order’s statement that the Trust “had not yet commenced its operations or sold any LLC interests under Regulation A” are not sufficient to establish a violation of Rule 251(d)(3)(i)(F). The only relevant fact is whether an offering commenced within two calendar days after the qualification date.

To wit, the Trust does not need to make actual sales of its LLC interests or commence purchases and investments in real estate properties and projects during that timeframe. By framing the alleged violation with these particular facts (taken from the Trust’s semi-annual report), the Order could potentially be misconstrued as indicating that a scenario of not having commenced operations or not having sold any LLC interests, constituted a sufficient condition for the violation of Regulation A. That would be a misreading, as neither of these conditions preclude the possibility that offers of the Trust’s LLC interests occurred.[4]

While the latter half of the Order’s statement—that is, the part of the sentence from the semi-annual report regarding the Trust’s “plans to begin raising money” later in the year—is itself ambiguous, it does provide sufficient grounds to support an inference that offers were not, in fact, made within two calendar days after the qualification date. For that reason, I voted to approve the Order.