Accredited Investor Advertised Offering under 506(c) of Reg. D

506(c) advertised offerings make it easier for companies to tap into a diverse network of investors and leverage new technologies to raise capital quickly and cheaply. For businesses looking to raise capital, doing so through a 506(c) advertised offering under Regulation D can be a smart choice. Rule 506(c) permits issuers to broadly solicit and generally advertise an offering, provided that all purchasers in the offering are accredited investors. Under the 506(c) exemption, the securities being sold do not have to be registered with the SEC, and they do not have to be registered or qualified by state securities regulators, which saves businesses time and money. Thus, 506(c) advertised offerings make it easier for companies to tap into a diverse network of investors and leverage new technologies to raise capital quickly and cheaply.

.506(c) advertised offerings under Regulation D are a somewhat recent development – before 2013, there was a prohibition against the general solicitation and advertisement of private placements. In 2012, Congress passed the 2012 Jumpstart Our Business Startups Act (JOBS Act). The Act was intended, in part, “to reduce barriers to capital formation, particularly for smaller companies.” Today, in order to ensure that investors have access to information to conduct their own due diligence on a company before entering into deals to purchase unregistered securities, Rule 506(c) requires certain limited disclosures, and limits investment to “accredited” investors who are seen as more savvy and able to bear risk. In addition, sellers and third parties contracted to conduct advertisement are still subject to federal securities antifraud laws as well as state notice filing requirements, fees, and antifraud investigations and actions. Finally, third-party advertisers are subject to Section 17(b) of the Securities Act of 1933, which requires advertisers to publicly disclose the source and amount of consideration received for their work with specificity. A 506(c) advertised offering under Regulation D can be an excellent capital-raising vehicle for businesses, but it should not be conducted without the advice and counsel of those with knowledge and experience in private offerings, including attorneys. VenturePlans has worked with X clients to provide such services, and our team is excited to help more eligible businesses utilize this unique exemption to raise capital. Contact us at 8555-VENTURE or schedule a consultation to learn more.