FREQUENTLY ASKED QUESTIONS

Carolina Financial Group, LLC (CFG) - background

What is CFG?

CFG, through its FINRA-registered broker dealer, Carolina Financial Securities, LLC (CFS), is an investment bank specializing in private placements of debt and equity securities, alternative asset investments, as well as mergers and acquisition advisory services.  Founded in 1995, we are “financiers” serving companies which need funding and also accredited investors who make private investments.  

CFG also provides business consulting services where necessary to improve a company’s operations and profitability, with an emphasis on financial management.

 

What types of Private Placements does CFG conduct?

At this time CFG only conducts Regulation D private placements in accordance with Rule 506(b).  CFG is not a crowdfunding platform and the firm does not underwrite or otherwise sell publicly registered securities.

 

Is CFG regulated by the U.S. government?

Yes…highly regulated.   CFS is regulated at both the U.S. federal and state levels.  This includes the U.S. Securities Exchange Commission, which regulates all U.S. Securities-related activity and “FINRA”, the Financial Industry Regulatory Authority, which is the SEC-monitored self-regulatory for the U.S. securities industry.  CFG’s broker dealer, CFS, has been a member firm of FINRA since 1997, and CFS reports all of its activities to FINRA on an ongoing basis, which includes periodic site visits to CFG branches by FINRA staff.  CFG is currently registered to conduct broker dealer activity in 26 states. Regulatory oversight extends to all business activities of CFS employees.

 

Where is CFG located?

CFG is headquartered in Brevard, North Carolina, which is in western North Carolina near Asheville.  CFG currently has three other branches in Darien, Connecticut, Irvine, California (near Los Angeles) and Raleigh, North Carolina.  CFG investment banking professionals are also located in Atlanta, Georgia; Miami, Florida; Chicago, Illinois;  Bedford, Indiana; Charlotte, North Carolina and San Francisco, California;

 

Who owns CFG?

CFG is a privately held company that is owned by its employees and outside investors.

 

CFG Banking and Investment Services

What services does CFG offer to investors?

CFG provides service to private investors in three primary and complementary ways: 

 

  1. Access to a unique, diverse and highly qualified selection of privately placed (i.e. not publicly registered) alternative asset investments, each having first received thorough due diligence review by CFG banking professionals,
  2. Self-selection by the investor which includes online access to comprehensive, Issuer-specific due diligence background material, 
  3. Managed risk as a result of ongoing monitoring of each investment by CFG investment professionals who, where necessary, implement of a given securities credit support provisions for the return of invested capital.

 

CFG investments encompass a wide variety of industries and investment strategies.  Private investments, either directly in companies or in managed funds, can be selected from CFG offerings to fit the specific objectives and risk tolerance of the HNW investor and their advisor. CFG private placements include private equity, venture capital, short and medium term debt, real estate, and project finance.

 

What types of services does CFG provide to its issuer clients?

CFG provides corporate finance as well as business consulting services to for-profit companies.  

Corporate finance includes private capital raising as well as merger and acquisition advisory services.  Clients range from well-established and growing middle market companies in traditional industries (manufacturing, distribution, agriculture, etc.)… to younger companies, sometimes technology oriented.

Business consulting involves in-depth analysis of a private company’s business operations, in particular its financial management systems.  Where necessary, CFG consulting professionals create financial modeling and reporting to better understand how a business is performing and for use in enhancing profitability on an ongoing basis.

 

 

How does CFG deliver capital to its issuer clients?

CFG conducts private offerings which are made available to CFG investors who then individually determine for themselves whether they wish to invest in an offering.  Thus the amount of capital needed by the issuer is aggregated through a syndication of participating investors. 

 

Does CFG manage an investment fund?

It is anticipated that CFG will soon also offer proprietary funds for those investors who prefer to invest through an actively managed fund.  At this time CFG only acts within a broker dealer capacity for its issuing clients and brokering sales to investors.  

 

Does CFG provide investment advisory services to individual investors?

No, though it is important that we understand our investors overall investment profile and goals to help assure that a given CFG offering is suitable.   CFG remains an investor advocate until the investment has either matured or is otherwise redeemed and provides investors with periodic updates of the company’s performance.  

 

Does CFG offer public securities for investment?

No.  CFS is only involved in private placement offerings of securities.

 

Does CFG make a secondary market in the securities it offers?

No.  Under current U.S. securities laws, privately placed securities are not eligible for active secondary market making.  They are “buy and hold” investments, where, for debt investments,  receive a return of principal either at maturity (in the case of Promissory Notes) or, for equity investments (eg. shares or membership interests),  upon a “liquidity event”, such as a structured redemption, sale of a company, recapitalization or following an initial public offering of the issuers stock.

 

What types of investments does CFG offer?

Both debt and equity securities, all privately placed and most resulting from corporate finance engagements CFG has to raise capital for its Issuer clients.  

Debt securities, such as Promissory Notes, can be short term (one year maturities or shorter) or medium term (up to five year maturities).  Many of CFG’s debt offerings are collateralized by the assets of the issuer and include personal guarantees of the person owning the issuer.  Some debt offerings include amortization, where the principal is incrementally repaid over the term of the Note.

Equity securities offered by CFG are typically in the form of preferred equity, wherein the investor is provided certain preferred dividend or other distributions, including the repayment of the original principal.  The equity can be from a broad variety and stage of issuer including venture capital (companies which have not achieved positive operating cash flow), private equity (companies with positive EBITDA) and project financing (equity underpinning a specific project).

 

Investor Considerations

 

What services does CFG offer to investors? 

CFG provides service to private investors in three primary and complementary ways: 

  1. Access to a unique, diverse and highly qualified selection of privately placed (i.e. not publicly registered) alternative asset investments, each having first received thorough due diligence review by CFG banking professionals,
  2. Self-selection by the investor which includes online access to comprehensive, Issuer-specific due diligence background material, 
  3. Managed risk as a result of ongoing monitoring of each investment by CFG investment professionals who, where necessary, implement of a given securities credit support provisions for the return of invested capital.

 

CFG investments encompass a wide variety of industries and investment strategies.  Private investments, either directly in companies or in managed funds, can be selected from CFG offerings to fit the specific objectives and risk tolerance of the HNW investor and their advisor. CFG private placements include private equity, venture capital, short and medium term debt, real estate, and project finance.

 

 

What amount does an individual investor typically invest in a CFG offering?

$100,000 is an average participation by individuals, with $25,000 set as a minimum.  Some participations are $1 million or higher.

 

Who invests in CFG offerings?

Only “Accredited Investors” as defined in Rule 501 of Regulation D of the SEC and as verified by third-party evidence acceptable to CFG.

 

What is an Accredited Investor?

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

  1. a bank, insurance company, registered investment company, business development company, or small business investment company;
  2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  3. a charitable organization, corporation, or partnership with assets exceeding $5 million;
  4. a director, executive officer, or general partner of the company selling the securities;
  5. a business in which all the equity owners are accredited investors;
  6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.