How Does Regulation D Rule 506c Work For Syndication?

Tilden Moschetti, a securities attorney with the Moschetti Syndication Law Group, presents an in-depth analysis of Regulation D Rule 506c. Moschetti emphasizes the value of direct reference to the regulation itself for clarity, drawing on advice from his law school professor. He cites Rule 506c in the context of its placement within Book 17 of the Code of Federal Regulations, emphasizing that it concerns exemptions for limited offers and sales irrespective of the dollar amount or offering.

Moschetti outlines the conditions to meet for Rule 506c eligibility. The rule requires compliance with all terms and conditions of 230.501 and 230.502 A and D. The definition of an accredited investor, as outlined in 501a, is highlighted as particularly significant for those considering Rule 506c.

Moschetti then explains the concept of integration: if a fund combines multiple offers, these offers must be evaluated to determine if they should be considered as one. This evaluation is crucial for those considering both 506 B and 506c, as the integration of offers could lead to potential complications. Rule 502 D imposes limitations on resale, asserting that the security should not be purchased with the intent of selling it, thus discouraging speculative purchase.

Finally, Moschetti discusses the specific condition in 506c that all investors must be accredited. This necessitates verification of the investor's accredited status, a task best accomplished through reliance on third parties such as registered broker-dealers, investment advisors registered with the Securities and Exchange Commission, licensed attorneys, or certified public accountants. These professionals should have firsthand knowledge of the investor's financial position to confirm their accredited status. He suggests that companies that certify an investor's status will likely have an attorney or accountant on staff to oversee the verification process.

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

Read more about Accredited Investors - What is an Accredited Investor under Reg D Rule 501?: https://www.moschettilaw.com/accredited-investor-definition/

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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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