SEC offers guidance on opportunity zone investments

The Securities and Exchange Commission teamed up with the North American Securities Administrators Association to explain the application of federal and state securities laws to opportunity zone investments in a new document.

The Tax Cuts and Jobs Act set up the opportunity zone program as a way to provide tax incentives for long-term investing in designated economically distressed communities, and it has spurred a hot real estate market trend.

The summary document issued by the SEC and the NASAA aims to help participants in the opportunity zone program understand the compliance implications for qualified opportunity funds under federal and state securities laws.

"The opportunity zone program has the potential to encourage investment and economic development in many areas across the country that are in need of capital,” said SEC chairman Jay Clayton in a statement Monday. “The staff statement released today will help market participants understand securities laws implications when seeking to raise capital for opportunity zones. In addition, today the SEC is issuing staff guidance regarding the ability of Main Street investors to participate in these offerings."

The summary talks about the opportunity zone program and when interests in qualified opportunity funds would be considered securities under federal and state securities laws. It also offers an overview of the SEC and state requirements relating to qualified opportunity funds and their securities offerings, broker-dealer registration, and considerations for advisers to a qualified opportunity fund. The summary is available on both the SEC's website and NASAA's website.

"This new program provides an opportunity to strengthen investments in low-income communities and rural areas that traditionally struggled to attract the capital necessary to spur economic growth and job creation," stated NASAA president Michael Pieciak, who is Vermont's Commissioner of Financial Regulation. "This joint summary is a good example of state and federal regulators working collaboratively to address new compliance issues raised by an innovative program and thereby promoting our dual mission of protecting investors and helping facilitate capital formation."

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