Syndication is the process of organizing into or administering as a syndicate. A Syndicate is an association of people or firms formed to engage in an enterprise or promote a common interest.

Syndicating an ASC or radiation therapy center entails the selling of a percentage ownership interest to investors, including referral source physician investors. Syndications are a way to raise capital and spread the risk of equipment and real estate ownership.

Doctors offering units in an ASC or radiation oncology center must comply with certain federal and state securities laws as well as a variety of limitations, under both federal and state law, on their ability to share ownership with referral sources.

To protect investors and assure the stability and integrity of the nation’s public and private market system, the government closely scrutinizes those involved in the sale of securities, requiring them to register and pass corresponding qualification exams.

Under Section 15(a) of the Securities Exchange Act of 1934 , any person acting as a “broker” must register with the SEC. According to the act, a “broker” is “any person engaged in the business of effecting transactions in securities for the account of others” or, if a natural person, to be associated with a registered broker-dealer.

Unregistered financial intermediaries who have provided services to surgeon owners who want to sell their centers have pretty much “flown below the regulatory radar.” In some cases, it is conceivable that some intermediaries knowingly violated securities laws hoping they would be lucky enough to avoid the potential legal ramifications for themselves and their clients. Some crossed their fingers and said a prayer that everything would go fine or that the statute of limitations would expire before any issues were raised. Others were simply not aware that what they were doing violated the law. In effect, the prevailing attitude has been “no harm, no foul.”

The potential for harm is a real risk, though. Unregistered financial intermediaries can create a multitude of problems for physician-owners seeking to sell or syndicate their centers. If an unregistered intermediary is determined to be “engaged in the business of selling securities for compensation,” that person may be subject to criminal or civil actions or both. The SEC and state securities authorities may bring an enforcement action not only against the registered intermediary, but also against the seller – for aiding and abetting a violation of the registration provisions. Sanctions may include civil penalties, forfeit of profits, with interest, or other court-ordered sanctions. Owners may also face risks from private litigants. The buyer of your ambulatory surgery center or radiation oncology center may have the right to rescind or unwind the deal altogether under Section 29(b) of the Exchange Act.

“Almost all states prohibit paying compensation to non-exempt unregistered broker-dealers as a requirement for private offering exemptions. Thus, paying transaction-based compensation to unregistered persons may lead to a claim that the issuer sold unregistered securities with no exemption, and the investor can seek to rescind the investment.”[x] The buyer also may be entitled to damages.

To learn more please read The Truth About Selling your ASC or Radiation Oncology Center and Selling Your Ambulatory Surgery Center or Radiation Oncology Center? Don't Take Chances.   If you want to sell your ASC or Radiation Oncology Center give us a call.