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How to Assess Deal Compliance With Regulations

Overview​

As a broker on the WhiteLabel Community Deals Platform, one of your most critical responsibilities is ensuring that all deals comply with relevant securities regulations before they're made available to investors. This guide will walk you through the process of conducting a thorough compliance assessment, identifying potential regulatory issues, and making informed decisions about deal compliance.

Prerequisites​

Before assessing deal compliance, you should:

  • Have an active broker account on the platform
  • Have accessed a pending deal for review
  • Possess knowledge of applicable securities regulations and exemptions
  • Understand the different offering types and their regulatory requirements
  • Be familiar with accreditation standards and investor qualification rules

Step-by-Step Instructions​

Step 1: Access the Deal for Compliance Review​

  1. From the Broker Dashboard, click on "View Pending" in the Pending Approvals card
  2. Alternatively, navigate to "All Deals" and select the "Pending" tab
  3. Click on the deal title you wish to review
  4. This will open the Deal Approval page

Step 2: Review Deal Overview and Structure​

  1. On the Deal Approval page, review the basic deal information:

    • Deal title
    • Issuer information
    • Target raise amount
    • Deal status (should be "Upcoming" for pending deals)
    • Sale start and end dates

  2. Click on the "Details" tab to view the complete deal structure

  3. Pay particular attention to:

    • Security type (equity, debt, token, etc.)
    • Offering exemption claimed (Reg D, Reg A+, Reg CF, etc.)
    • Minimum investment amount
    • Token or share pricing
    • Investor restrictions

Step 3: Verify Offering Exemption Requirements​

  1. Based on the claimed exemption, verify that the deal meets all requirements:

    For Regulation D (506b) offerings:

    • Confirm no general solicitation is planned
    • Verify accredited investor verification procedures
    • Check for proper disclosure documents

    For Regulation D (506c) offerings:

    • Verify rigorous accredited investor verification procedures
    • Confirm proper disclosure documents
    • Check that general solicitation materials comply with regulations

    For Regulation A+ offerings:

    • Verify SEC qualification documentation
    • Check offering circular for required disclosures
    • Confirm offering amount is within Tier 1 or Tier 2 limits

    For Regulation CF offerings:

    • Verify offering is through a registered funding portal
    • Confirm offering amount is within limits
    • Check for required Form C disclosures

  2. Document any discrepancies or missing requirements

Step 4: Review Investor Qualification Procedures​

  1. Examine the investor qualification procedures:

    • Review the investor questionnaire
    • Check accreditation verification methods
    • Verify KYC/AML procedures
    • Confirm geographic restrictions are properly implemented
    • Check investment limit calculations for non-accredited investors (if applicable)

  2. Ensure the procedures are appropriate for the offering type

  3. Verify that the platform's technology properly enforces these restrictions

Step 5: Examine Offering Documents​

  1. Click on the "Documents" tab to access all deal documents

  2. Review each document for regulatory compliance:

    • Private Placement Memorandum (PPM) or Offering Circular
    • Subscription Agreement
    • Operating Agreement or Bylaws
    • Risk Factors
    • Financial Statements
    • Use of Proceeds

  3. Verify that all required disclosures are present and adequate

  4. Check for consistency across all documents

  5. Ensure risk factors are comprehensive and clearly stated

Step 6: Assess Marketing Materials​

  1. Review any marketing materials included with the deal:

    • Pitch deck
    • Executive summary
    • Videos or presentations
    • Website content

  2. Verify that marketing materials:

    • Contain no misleading statements
    • Include required disclaimers
    • Are consistent with offering documents
    • Comply with regulations for the specific exemption
    • Properly disclose risks

  3. Flag any problematic content for issuer revision

Step 7: Evaluate Financial Disclosures​

  1. Review the financial information provided:

    • Financial statements (level of review/audit appropriate for exemption)
    • Revenue projections and their basis
    • Capitalization table
    • Valuation methodology
    • Use of proceeds breakdown

  2. Verify that financial disclosures are:

    • Complete and accurate
    • Prepared according to appropriate standards
    • Consistent with the offering's size and complexity
    • Transparent about assumptions and risks

Step 8: Check Issuer Background​

  1. Review issuer background information:

    • Management team qualifications
    • Prior offerings or fundraising
    • Regulatory history
    • Litigation history
    • Conflicts of interest

  2. Verify all required "bad actor" disqualification checks have been completed

  3. Document any concerns that require further investigation

Step 9: Document Compliance Findings​

  1. As you review each aspect of the deal, document your findings:

    • Use the "Comments" tab to record compliance observations
    • Be specific about any issues identified
    • Reference relevant regulations when noting compliance concerns
    • Distinguish between critical issues and minor suggestions

  2. Organize your comments by category:

    • Exemption requirements
    • Disclosure issues
    • Investor qualification concerns
    • Marketing material problems
    • Financial disclosure questions

Step 10: Make a Compliance Determination​

  1. Based on your comprehensive review, make one of the following determinations:

    • Approve: The deal fully complies with all applicable regulations
    • Request Changes: The deal has compliance issues that must be addressed before approval
    • Reject: The deal has fundamental compliance problems that make it unsuitable for the platform

  2. If requesting changes, clearly outline what modifications are needed

  3. If rejecting, provide a detailed explanation of the regulatory issues

Best Practices​

  • Stay Updated: Keep current on regulatory changes and enforcement actions
  • Be Thorough: Review all aspects of the deal, not just obvious compliance points
  • Document Everything: Maintain detailed records of your compliance review
  • Be Consistent: Apply the same standards to all deals
  • Seek Expertise: Consult with legal counsel on complex compliance questions
  • Educate Issuers: Help issuers understand compliance requirements
  • Focus on Investor Protection: Prioritize protecting potential investors
  • Consider Precedent: Be aware of how similar deals have been handled
  • Maintain Independence: Conduct objective compliance reviews regardless of business pressures
  • Continuous Monitoring: Be prepared to reassess compliance if deal terms change

Troubleshooting​

Common Issues​

  1. Unclear Exemption Basis

    • Solution: Request explicit documentation of which exemption is being relied upon
    • Solution: Provide guidance on which exemption would be most appropriate
    • Solution: Verify that the issuer understands the requirements of their chosen exemption

  2. Inadequate Disclosure Documents

    • Solution: Provide a checklist of required disclosures for the specific exemption
    • Solution: Request revision with specific guidance on what's missing
    • Solution: Share templates or examples if permitted

  3. Problematic Marketing Materials

    • Solution: Highlight specific statements that are potentially misleading
    • Solution: Provide guidance on required disclaimers
    • Solution: Request removal of non-compliant content

  4. Insufficient Investor Qualification Procedures

    • Solution: Recommend specific verification methods appropriate for the offering
    • Solution: Suggest platform features that can help enforce proper qualification
    • Solution: Provide examples of compliant qualification procedures

  5. Inconsistencies Across Documents

    • Solution: Create a side-by-side comparison highlighting inconsistencies
    • Solution: Request reconciliation of contradictory information
    • Solution: Suggest a comprehensive review by the issuer's legal counsel

Getting Help​

If you encounter complex compliance questions during your review:

  1. Navigate to the /support Support center by clicking on the "Support" link in the main navigation
  2. Select the appropriate category for your issue
  3. Provide specific details about your compliance question
  4. Submit your support request
  5. Support staff will respond through the platform's notification system