Legal Question in Business Law in Massachusetts

Professors Inviting Undergrads to Invest

If a professor is starting a company in the State of Mass for which he is raising money under Reg D, is it legal for him to approach undergraduate students if they are not accredited investors?


Asked on 1/04/09, 5:34 pm

1 Answer from Attorneys

Re: Professors Inviting Undergrads to Invest

Regulation D requires someone to meet certain standards unless they are deemed founding partners. Founding partners are exempt from Regulation D. However, I think it is inappropriate for a professor to seek investment from his students and it may violate university guidelines to do so. For instance, how can a professor who is teaching a student grade them fairly if they are an investor in his company?

The Professor can invite anyone to invest if they are not one of his active students, meaning he has completed teaching them. However, they will still need to meet Reg D to invest. Otherwise the Professor is making a very serious mistake.

Good luck.

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Answered on 1/04/09, 5:43 pm


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