How To Legally Raise Opportunity Zone Capital, With Andrew Doup

Raising capital for an Opportunity Zone project isn’t easy. Plus, there are numerous legal complexities to consider if you want to avoid potential civil and criminal penalties.

Andrew Doup, founder of SyndicationCounsel, joins the show to discuss how OZ project sponsors and investors can protect themselves legally by making appropriate SEC filings, disclosing material risks in PPMs, and more.

Episode Highlights

  • When securities laws apply to a fundraise (and when they don’t).
  • The penalties for securities compliance failure, and why the SEC has increased enforcement actions in recent years.
  • The three essential documents that all fund managers should have — operating agreement, private placement memorandum (PPM), and subscription agreement.
  • Why most Qualified Opportunity Fund file a Form D with the SEC.
  • Red flags to avoid as an investor, before writing a check.

Guest: Andrew Doup, SyndicationCounsel

Featured On This Episode

About The Opportunity Zones Podcast

Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Transcript Summary

Raising capital for an Opportunity Zone (OZ) project is challenging, requiring not only financial acumen but also strict compliance with securities laws. In this episode of the Opportunity Zones Podcast, host Jimmy Atkinson interviews Andrew Doup, founder of Syndication Council and a nationally recognized Opportunity Zones attorney specializing in securities law.

Doup shares insights on how securities law impacts capital formation for Opportunity Zone funds (QOFs) and Opportunity Zone businesses (QOZBs). The conversation covers when securities laws apply, how to remain compliant, and what risks fund managers and investors need to be aware of.

Understanding When Securities Law Comes Into Play

1. The General Rule: Passive Investors Trigger Securities Regulation

Doup explains that securities law applies when a business or fund accepts capital from passive investors—those who do not actively participate in management.

  • If all partners are actively involved, securities laws may not apply.
  • If passive investors (LPs) are involved, the project likely falls under federal and state securities regulations.

2. Two Common Scenarios Where Securities Laws Apply

  • Single-Asset Opportunity Zone Project: Raising funds from passive investors to construct an apartment building.
  • Multi-Asset Opportunity Zone Fund: A QOF structured with LP investors contributing capital.

In both cases, securities law applies because investors are not actively managing the assets themselves.

3. When Securities Laws Do Not Apply

  • If all investors are general partners (GPs) actively involved in management.
  • If an individual or a small group (such as a husband and wife) self-funds the project.
  • In these cases, securities law risks are significantly reduced.

Why Securities Laws Exist & Their Impact on Opportunity Zone Funds

Securities regulations have existed for nearly a century, originating in response to market abuses during the Great Depression. The Securities and Exchange Commission (SEC) enforces these rules to:

  1. Promote capital formation (ensuring businesses can access investor funds).
  2. Protect investors from fraud and misleading investment opportunities.

Doup notes that OZ projects are fully subject to these laws, and the SEC has been increasing its enforcement actions, particularly due to the rise of social media influencers promoting investments.

The Risks of Non-Compliance

Failing to comply with securities laws can lead to severe consequences, including:

  • Civil penalties (lawsuits, fines, damages).
  • Criminal liability (in extreme cases, fund managers could face jail time).
  • Regulatory enforcement from the SEC or state regulators.

Doup warns that 2024 saw a record number of SEC enforcement actions, particularly against fraudulent offerings promoted online.

Protecting Yourself as a Fund Manager or Developer

1. Use Three Key Legal Documents

Fund managers must have proper documentation to protect themselves and remain compliant:

1️⃣ Operating Agreement / LLC Agreement

  • Defines management roles, decision-making authority, and investor rights.
  • Clarifies GP vs. LP structure and limits investor control over decisions.

2️⃣ Private Placement Memorandum (PPM)

  • A legal disclosure document that outlines:
    • Investment strategy
    • Financial projections
    • Potential risks
  • Provides transparency to investors and protects fund managers from liability.

3️⃣ Subscription Agreement

  • Defines how investors subscribe to the fund, their financial commitments, and legal obligations.
  • Includes investor representations & warranties (e.g., confirming accredited investor status).
  • Shifts securities liability risk from fund managers to investors.

2. SEC Filings: Regulation D and Form D

To legally accept investor capital, most private funds file a Form D with the SEC, which:

  • Preempts state registration requirements, allowing nationwide fundraising.
  • Defines whether the offering is under Regulation D (506(b) or 506(c)).

Doup emphasizes that selecting the right regulatory exemption is critical and should be done with legal counsel.

Disclosure & Consent: The Cornerstones of Compliance

1. Full Disclosure to Investors

  • Transparency is key. Fund managers must disclose risks and ensure investors understand the offering before they commit capital.
  • The PPM (Private Placement Memorandum) is the main tool for investor disclosure.
  • Failure to disclose material risks (such as potential project delays or economic downturns) can result in investor lawsuits.

2. Securing Investor Consent

  • If business conditions change, fund managers must notify investors and obtain their consent for major decisions.
  • The operating agreement governs what rights investors have, including voting rights on critical issues.
  • Failing to get investor approval on key changes can lead to liability claims.

Doup stresses that securities law violations don’t always involve fraud—even a simple failure to properly disclose or obtain consent can expose a fund to lawsuits.

Marketing an Opportunity Zone Fund: What’s Allowed?

With the rise of social media and online marketing, fund managers must understand what they can and cannot say when promoting an OZ fund.

1. Avoid Over-Promising Returns

  • Investors often ask, “What IRR can I expect?”
  • Doup warns that projected IRRs (Internal Rates of Return) are just estimates and can fluctuate due to economic conditions.
  • Misleading or overly aggressive projections can trigger securities fraud claims.

2. Fund Managers Should Stick to Facts

  • Avoid making guarantees. Instead of saying “This project will return 18% IRR”, say “Our goal is an 18% IRR, but returns are subject to market conditions.”
  • Always include a disclaimer clarifying that past performance is not indicative of future results.

3. Red Flags for Investors

If you’re an investor considering an OZ fund, Doup advises looking out for warning signs:
✔️ Request the offering documents (PPM, operating agreement, subscription agreement).
❌ If a sponsor doesn’t provide legal documents, that’s a major red flag.
✔️ Review the fund’s SEC filing (if applicable) to verify its legitimacy.

Final Takeaways: Key Steps for Fund Managers

🔹 Always consult with a securities attorney before raising capital.
🔹 Have a strong legal framework (PPM, operating agreement, subscription agreement).
🔹 Ensure full disclosure and obtain investor consent for material changes.
🔹 File the correct SEC exemptions (Form D, Reg D, etc.).
🔹 Market responsibly—avoid misleading claims about returns.

By following these steps, Opportunity Zone sponsors and developers can raise capital legally and with confidence, while protecting both their investors and themselves from unnecessary risk.