ANTI-FRAUD DISCLOSURE OBLIGATIONS

	Besides specific disclosure guidelines imposed by federal or state securities regulations
and tied to a given offering funding level, the sponsor of a limited partnership,
passive investor limited liability company or corporate stock offering must comply
with the more general federal and state prohibitions relating to fraud (e.g., Section
17, Securities Act of 1933).

	The Anti-fraud provisions of the Securities Act of 1933 provides in part that:

		"(a) It shall be unlawful for any person in the offer or sale of any securities
by the use of any means or instruments of transportation or communication in interstate
commerce or by the use of the mails, directly or indirectly (1) to employ any device,
scheme, or artifice to defraud, or (2) to obtain money or property by means of any
untrue statement of a material fact or any omission to state a material fact necessary
in order to make the statements made, in the light of the circumstances under which
they were made, not misleading, or (3) to engage in any transaction, practice, or
course of business which operates or would operate as a fraud or deceit upon the
purchaser."

	Thus, to avoid fraudulent conduct in a securities offering, such issuer and all
of those representing the issuer must disclose all material aspects of the transaction,
i.e., provide a written discussion of everything that an average investor would
consider important about the deal; and the issuer must avoid:

	1.  failing to state a material fact which is necessary to avoid misleading the
investor about the issuer or the offering; or

	2.  making any untrue statement of a material fact.

	In summary, all material aspects of the transaction must be disclosed and what
is disclosed must be accurate, i.e., DO NOT LEAVE ANYTHING OUT IF IT IS IMPORTANT
AND DO NOT DISCLOSE ANYTHING THAT IS NOT TRUE.  The standard for what is "material"
is whether such information would be considered important to a typical prospective
investor in making the decision to invest in the offering.

	As a practical matter, it is much easier to comply with the anti-fraud requirements
if everything that is disclosed about a given offering is in writing, in one or
just a few documents which are prepared or reviewed by the securities attorney and
no oral presentation departs from the information presented in that document.  The
issuer must resist the temptation to draft a "selling document" and instead put
together a combination "compliance/selling document" which is designed to protect
the entire program and its sponsors and well as sell the offering.

	The anti-fraud requirement often creates a certain amount of tension between the
securities attorney and the program sponsor/client since it is the tendency of the
program sponsor/client to be very public relations oriented (i.e., they are attempting
to put their best foot forward with every bit of information presented regarding
their project, whereas the securities attorney is trying to prevent a successful
lawsuit from being litigated by a disgruntled investor after the fact and based
on securities fraud, a cause of action which will surely be alleged in almost any
suit involving a securities offering).