If an offeror is making an offering that does not allow public advertising, such as a traditional Rule 506 offering, then according to the SEC a pre-existing substantive relationship is required before a potential investor can invest. Specifically, the SEC has said that the existence of a relationship between potential purchasers and an issuer prior to an offer is an important factor in determining whether there is public advertising in violation of the securities laws. As one might expect, the SEC has been criticized for conflating a pre-existing relationship with the lack of public advertising.
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