Rule 501 created the Accredited Investor definition for Investor eligibility for Rule 505 and Rule 506 Regulation D Private Placements. The Accredited Investor definition includes high net worth individuals whose income exceeds either $200,000/year (for single persons) or $300,000/year (for married couples) or a net worth exceeding $1,000,000 (excluding the value of their principal residence).
Rule 506 is by far the most widely used Regulation D exemption, accounting for an estimated 90 to 95% of all Regulation D Offerings and the overwhelming majority of capital raised in transactions under Regulation D.
Nearly any type of Security can be offered through a Regulation D Private Placement (e.g., common stock, preferred stock or membership interest in a Limited Liability Company).
Rule 506(b) of Regulation D enables Issuers to issue an unlimited amount of Securities so long as no more than 35 non-accredited Investors participate in the Offering.
Investors participating in a 506(b) Private Placement must self-verify that they qualify as Accredited Investors via a complete an “Accredited Investor Questionnaire”
Regulation D Private Placements are subject to all other federal and state regulations regarding misrepresentation or fraud.
Form D must be filed with the SEC, and in each state, the Securities are sold under Regulation D within 15 days of the commencement of the Offering.
SEC Rule 506(c) allowed, for the first time, “general solicitations” of Private Placements to Accredited Investors.
Rule 506(c) of Regulation D enables Issuers to issue an unlimited amount of Securities so long as only Accredited Investors participate in the Offering.
Rule 506(c) of Regulation D, approved by the SEC on July 10, 2013, enabled “general solicitation” (i.e., advertising) for Regulation D Offerings where only Accredited Investors may purchase the Securities offered under 506(c). Under this Rule, the SEC must receive the Offering documents as least 15 days before the solicitation is to occur (an Advanced Form D Filing) and also notification within 15 days of the first purchase by an Investor (a Form D Filing). Not making each filing within the prescribed deadlines could result in a prohibition of the Issuer’s access to the Regulation D market for 1 year.
Investors participating in a 506(c) Private Placement must complete an “Accredited Investor Questionnaire.” Rule 506(c) of Regulation D enables Issuers to issue an unlimited amount of Securities so long as only Accredited Investors participate in the Offering. This will be required in the paperwork for Self Directed IRAs
All Accredited Investors participating in a 506(c) Private Placement must also provide third-party verification that they qualify as an Accredited Investor.
