Exploring Rule 506B2 and Limitations on Purchasers

Tilden Moschetti, a syndication attorney with Moschetti Law Group, specializes in Regulation D filings (506b and 506c). His work primarily involves producing private placement memorandums, operating agreements, subscription agreements, and investor questionnaires. He ensures that syndicators are raising capital in a legal and compliant manner.

In this communication, he dives deep into Rule 506b, a crucial part of Regulation D. Moschetti explains the concept of exemptions and how securities must be registered with either the state or the SEC unless they qualify for exemptions. Rule 506b is one such exemption under Regulation D.

According to Moschetti, the key considerations for Rule 506b are:

Qualification for Exemption: Offerings and sales must satisfy all terms and conditions of section 230.501 and 230.502.

Understanding Rule 501: This relates to who can invest and how advertising works. It details accredited investors and what is prohibited under Rule 501 for 506 B offerings.

Understanding Rule 502: This discusses what needs to be communicated to the investors through the private placement memorandum (PPM), including non-financial information like the investment type and risks, financial information, opportunity for investors to ask questions, and limitations on resale of securities.

Moschetti further delves into the limitations on advertising under Rule 501c. This rule prohibits issuers from making a general solicitation or advertising the offering to the public. The exceptions to this rule are under Rule 504 and Rule 506c.

In the second part of Rule 506b, Moschetti clarifies the limitation on the number of purchasers. He explains that no more than 35 purchasers can participate in an offering under this section in any 90-day period. However, this count does not include accredited investors, who are excluded under Rule 501e. This allows issuers to raise funds from a larger pool of accredited investors without violating the limit on the number of purchasers.

In summary, this deep dive into Rule 506b provides valuable insights into the complexities and intricacies of Regulation D, highlighting the importance of being compliant with the SEC's rules and regulations while raising capital.

Read more about Reg D Rule 506b - Rule 506b of Reg D: Non-Accredited Investors & No Solicitation: https://www.moschettilaw.com/rule-506b-of-reg-d/

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Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, and well as private equity firms. We keep our firm ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers without making you book an official appointment. And we’ll work with your ambitions and overall vision to help you close the current deal and fill-in that ‘missing’ piece - whatever you need - to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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