Securities Act Rule 506(c) - A Few Things to Think About if You Decide to Engage in General Solicitation


 A few things to think about if you decide to engage in General Solicitation:

1. Develop a plan as to type and content of the communications. You need to be in control so that all communications are appropriate and consistent.

  • Limit the persons who are permitted to speak on behalf of your company.
  • Identify those persons in your communications.
  • Do not allow employees and other unauthorized persons to engage in general solicitation on your behalf.
  • Review your social media policy to control and coordinate who communicates during an offering process.  Social media is a danger zone as well as a tool.
  • Consider your future offering needs, remembering that once you engage in general solicitation you cannot accept funds from non-accredited investors until you are safely beyond the 6-month integration period.  SEC rules in this area are not clear, so be careful.
  • While there are no specific disclosure/information requirements in a 506(c) offering, remember that you are still obligated to provide information needed for your potential investors to make an informed decision.

2. You will want to develop director/officer questionnaires. “Bad actors” will disqualify you from relying on Rule 506(c).

3. 506(c) will be effective September 23, 2013.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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