http://www.sec.gov/Archives/edgar/data/1482381/000148238110000006/xslFormDX01/primary_doc.xml

Looks like Freehold Capital Partners filed a Form D with the SEC in June of this year indicating that they had already sold $5,000,000 worth of these securities. The exemption was based on Federal Rule 506. Unfortunately for the average American consumer, federal law does allow exemptions from securities filings which allow certain types of securites to fly under the radar. No audited financials have to be filed and no preliminary audit takes place. However, in order to keep the exemption, Freehold cannot engage in general solicitation of their securities and they cannot misrepresent the securities for sales purposes, as well as a few other types of actions that would cease the benefit of the exemption.

Civil remedies for a blown exemption include recission of the whole offer, which allows any purchasers to demand that the original issuer buy back all of the securities sold.  This is the issue that is currently being bounced around in reference to the mortgage-backed securities (MBS). The MBS's were overvalued and certain irregularities were not disclosed to the end investor. This led, in part, to the current economic state of affairs, as well as the record number of wall street firm and bank bailouts.

My questions are these.....how is Freehold valuing these transfer-fee-backed securities to the end investor? Who is making the determination of when the current homeowner will sell the residence, what the value of the home will be at the time, and whether the fee will be collectible if missed? What is the value of protracted litigation when these fees are missed or if sellers refuse to pay them? How can there be any historical information that would allow Freehold to value these securities on the open market?  Based on the current real estate market, it can only be speculation at this point.

Finally and more generally, does this sale of securities truly qualify under 506 for the federal exemption in the first place?

If the title and realtor organizations cannot stop Freehold, perhaps federal and/or state securities regulators can.