![]() For Rule 506(b) offerings, each non-accredited investor must receive an extensive disclosure document with almost as much detail as that required in SEC Registration Statements and Regulation A Offering Circulars.The company must be available to answer questions by prospective purchasers.All non-accredited investors, either alone or with a purchaser representative, must be sophisticated-that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. The company may sell its securities to an unlimited number of “ accredited investors” and up to 35 other purchasers.Unlike Rule 506(c) discussed below, no accredited investor verification is required.The company cannot use general solicitation or advertising to market the securities.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, including the following: As discussed in more detail below, Rule 506(b) permits sales to up to 35 non-accredited investors and an unlimited number of accredited investors while Rule 506(c) allows sales to be using general solicitation and advertising so long as the issuer verifies that all investors are accredited purchasers. The most common exemption from SEC Registration is Rule 506 of Regulation D which provides for two unique exemptions from SEC registration that allow the issuer to raise unlimited amounts of capital if it complies with the specific requirements of each rule. The common exemptions from SEC registration for companies using Private Placement Memorandums to raise capital are provided by Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). In going public transactions, the shares held by these investors will often by registered on Form S-1 so that the Company meets the requirements of the Financial Industry Regulatory Authority (“FINRA”) to obtain its ticker symbol assignment. When a Company sells equity, it most often offers common shares to investors who become shareholders of the Company. Private Placement Memorandum disclosures vary depending on whether the investor is accredited or non-accredited and whether the Company is subject to the SEC’s reporting requirements. ![]() Private placements are also used by existing public companies to raise capital by selling either debt or equity pursuant to an ex emption from SEC registration such as that found in Rule 506 of Regulation D. Private Placement Memorandum’s are used by private companies who intend to stay private and as part of a going public transaction. A Private Placement Memorandum is sometimes referred to as a confidential offering circular or an offering memorandum.
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