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Regulation D Rule 506 Private Placement

Rule 506 of Regulation D has grown to become the most popular of the Reg. D exemptions under which a company can be exempt from filing a registration statement to raise capital. The primary reason for this is that all states recognize Rule 506 as it is written at the federal level. This makes compliance with state blue sky laws easier. According to an SEC report, 99% of reported Regulation D offerings used Rule 506 despite the fact that over two-thirds of the issuers could have used Rule 504 or 505 based on their limited offering sizes.

The Rules for a Regulation D Rule 506 Exemption include, but are not limited to:

• No general solicitation or advertising in marketing the securities, unless the company will only accept investments from accredited investors pursuant to Rule 506(c);
• Sales may occur to an unlimited number of accredited investors, but are limited to only 35 other purchases;
• Companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings;
• If a company provides information to accredited investors, it must make this information available to non-accredited investors;
• The company must be available to answer questions by prospective purchasers;
• Financial statements are required (same as Rule 505);
• Purchasers must receive “restricted” securities, meaning that the securities cannot be sold for at least one (1) year unless registered.

While companies using the Rule 506 exemption do not have to register their securities and usually do not have to file reports with the SEC, they must file what is known as a “Form D” after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company.

These regulations can sound daunting, especially in light of the fact that you’ll have to jump through all these hoops while launching and managing your business.  We understand, because our Regulation D Rule 506 Lawyers have been in your shoes, not only as attorneys, but as business people.

Our Private Placement lawyers in Florida have consulted, drafted, and raised capital for companies via private placements in numerous industries including hospitality, entertainment, gaming, and others.

Our South Florida based business law attorneys serve clients in Palm Beach County, Broward County, Miami Dade County, and throughout Florida.

If you’re interest in learning more about raising money for your company, please contact us.

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