Regulation D Rule 506

Regulation D Rule 506 is a “safe harbor” for the private offering exemption. Under this rule, companies can raise an unlimited amount of capital to an unlimited number of accredited investors and up to 35 other purchasers. Also, subject to certain restrictions, the company may use general solicitation or advertising to market the securities. Unlike Rule 505, 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. Further, purchasers receive restricted securities, which may not be freely traded in the secondary market after the offering. Lastly, the seller must be available to answer questions by prospective purchasers. Please consult with an attorney.

Understanding Reg D Exemptions for Raising Capital

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