December 14, 2021

Specific Questions and Answers Regarding Reg D, Rule 506 B

What is meant by a Reg D offering?

Generally, securities offerings must be registered with the Securities Exchange Commission (SEC) or be exempt from registration. Common exemptions from registration are described in the Securities Act of 1933 (Securities Act), Regulation D (Reg D), with Rule 506(b) or Rule 506(c) being the exemptions most often used. There are other options under the Securities Act, Regulation A and Regulation CF, which are other options to consider with your attorney.

Rule 506 B is a “safe harbor” by the Securities Section 4(a)(2), which exempts from registration private investment offerings. Offering under Rule 506 B can raise an unlimited amount of money from an unlimited number of accredited investors and a limited number of sophisticated non-accredited investors. However, no general (public) solicitations or advertisements are allowed. 

Rule 506 C allows you to broadly solicit and generally advertise your investment opportunity so long as all investors are verified as accredited investors, as defined by Reg D, Rule 501.

There are additional Reg D requirements and options in either event. It is crucial for you to consult with a qualified securities attorney before relying on any securities regulations or exemptions.

This question is crucial. While you might think that establishing a Facebook group can be constituted as a pre-existing relationship and is therefore exempt from the general solicitation rules, this is not true. When it comes to Facebook groups, it isn’t wise to directly solicit your offering on that group because there is no way of determining the seriousness of the relationship between you and any of your Facebook group members. Just because someone has clicked on the join button doesn’t mean you have established a legitimate relationship.

Facebook groups are great in that they can open the door to a future relationship. However, just because you have members who have joined the group doesn’t give you the right to solicit your investment through a marketing blast. With this in mind, it is essential to know that not everyone in your group might be who they claim they are. Specifically, with real estate investing groups, it has been shown that many regulators have started to join these kinds of groups. This could prove to be detrimental to your securities offering if they find you non-compliant with the regulations outlined in Regulation D Rule 

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