What this page covers
This page sets out the federal rules behind the exemptions used on this platform. Each rule has its citation beside it. State rules are on the state pages. States that are not researched are on the other states page.
Which exemption fits an offering is a question for securities counsel. This page does not answer it.
Rule 506(b)
- An offering under Rule 506(b) may sell to no more than 35 non-accredited purchasers (17 CFR 230.506(b)(2)(i)). Purchasers are counted under 17 CFR 230.501(e), which leaves accredited investors out of the count (17 CFR 230.501(e)(1)(iv)).
- The issuer and anyone acting for it may not use general solicitation or general advertising (17 CFR 230.502(c)).
- When any buyer is not accredited, the issuer has a duty to give that buyer the disclosure the rule requires (17 CFR 230.502(b)).
Rule 506(c)
A Rule 506(c) offering may use general solicitation (17 CFR 230.502(c), which excepts 17 CFR 230.506(c)). Every purchaser must be an accredited investor (17 CFR 230.506(c)(2)(i)), and the issuer must take reasonable steps to verify that status (17 CFR 230.506(c)(2)(ii)). The rule lists methods. They are not the only ways to verify:
- Review IRS income forms for two years (17 CFR 230.506(c)(2)(ii)).
- Review asset and liability records dated within three months (17 CFR 230.506(c)(2)(ii)).
- Get a written confirmation, dated within three months, from a registered broker-dealer, an SEC-registered adviser, a licensed attorney or a CPA (17 CFR 230.506(c)(2)(ii)).
Regulation Crowdfunding
- An issuer may raise up to $5,000,000 in 12 months (17 CFR 227.100).
- The offering runs through one registered intermediary (17 CFR 227.100). That is a broker-dealer or funding portal registered with the SEC.
- Advertising is limited to a notice (17 CFR 227.204).
- Investor funds are held by a qualified third party until the target amount is met (17 CFR 227.303(e)).
Regulation A
- Tier 1 allows an offering of up to $20,000,000 in 12 months. Tier 2 allows up to $75,000,000 in 12 months (17 CFR 230.251).
- A testing-the-waters notice states that (17 CFR 230.255):
- no money is accepted;
- no sale is made until the offering is qualified;
- an indication of interest is non-binding.
- Tier 1 issuers register or qualify the offering in every state where they sell. Tier 2 issuers do not register with states, but they may still owe state notice filings and fees (SEC Regulation A issuer guide).
- Tier 2 issuers file an annual Form 1-K within 120 days of fiscal year end, a semiannual Form 1-SA and current reports on Form 1-U (17 CFR 230.257; SEC Regulation A issuer guide).
Form D and state notices
A Rule 506 or Rule 504 offering needs a Form D filed on EDGAR within 15 calendar days after the first sale. There is no SEC fee (SEC, filing a Form D notice).
Rule 506 offerings are exempt from state registration, because the statute covers securities sold under rules issued under section 4(a)(2) (15 U.S.C. 77r(b)(4)(F)). That exemption is not stated for Rule 504 here. Securities counsel confirms the state position for a Rule 504 offering. States may still require a notice filing and a fee, and most do when someone in that state invests (see the state pages).
Resale
- Rule 144 sets the holding periods: six months for reporting issuers and one year otherwise (17 CFR 230.144).
- After the lock ends, resale routes through a licensed broker-dealer or an alternative trading system (ATS). An ATS files Form ATS (SEC ATS list).
Pooled vehicles and fund managers
The Investment Company Act has exclusions that a pooled vehicle may rely on. They are in 15 U.S.C. 80a-3(c)(1), (c)(5)(C) and (c)(7). Securities counsel decides which one, if any, fits a given vehicle.
The Investment Advisers Act (15 U.S.C. 80b) may apply to a fund manager. Securities counsel decides whether it does.
Stablecoins
GENIUS Act: Subscriptions and distributions in stablecoin use only payment stablecoins whose issuers are permitted under the Act once its rules take effect. The platform does not issue a stablecoin.
What this page does not cover
State securities rules, state real estate licensing and state taxes are on the state pages. A federal rule that is not listed here is not covered. Its absence is not a statement that it does not apply.
Not legal advice. Securities and real estate counsel in United States sign off before any first close.