Research Outline # 4
Title of Article: Rule 506 of Regulation D
Author(s): The United State Securities and Exchange Commission
Publication Year: 2017
I. Thesis. Rule 506 of Regulation D provides two distinct exemptions from registration for companies when they offer and sell securities. Companies relying on the Rule 506 exemptions can raise an unlimited amount of money.
II. MAIN IDEA: Under Rule 506(b), a “safe harbor” under Section 4(a)(2) of the Securities Act, a company can be assured it is within the Section 4(a)(2) exemption by satisfying certain requirements
A. The company cannot use general solicitation or advertising to market the securities.
1. Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws.
2. any information a company provides to investors must be free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading.
B. Under Rule 506(c), a company can broadly solicit and generally advertise the offering and still be deemed to be in compliance with the exemption’s requirements
- To do this all investors MUST be accredited
- Also, the company takes reasonable steps to verify that the investors are accredited investors, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the lik
Capstone 2020 