Rule 506(b versus Rule 506(c

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Rule 506(b versus Rule 506(c
Can I use 506(b and 506(c concurrently?
No, you cannot with respect to the same offering. Form D to asks you to indicate
whether you are proceeding under Rule 506(b or 506(c.

Can I file an Advanced Form D for a 506(c as a safe harbor for
general solicitation, and then use 506(b instead?
Yes. You can file an Advance Form D for a 506(c and then choose to
conduct a 506(b offering instead (and so inform the SEC). However, if
you have already solicited, you will be locked into the 506(c.
You can switch from a 506(b to a 506(c at any time, but not vice versa.
Question 260.11 at the SEC web site reads: “If an issuer commenced an offering
intending to rely on Rule 506(c but did not engage in any form of general
solicitation in connection with the offering, may the issuer subsequently determine
to rely on Rule 506(b for the offering? Yes, as long as the conditions of Rule 506(b
have been satisfied with respect to all sales of securities that have occurred in the
offering. To the extent the issuer already filed a Form D indicating its reliance on
Rule 506(c, it must amend the Form D to indicate its reliance on Rule 506(b
instead, as that decision represents a change in the information provided in the
previously-filed Form D.”
Use of an expanded investor suitability questionnaire will help satisfy the
“reasonable steps to verify" requirement under Rule 506(c.

In a Final Rule Release lifting the ban on general solicitation, the SEC
states that:
“Issuers will continue to have the ability under Rule 506(b to conduct
Rule 506 offerings subject to the prohibition against general
solicitation. As we noted in the Proposing Release, offerings under
existing Rule 506(b represent an important source of capital for
issuers of all sizes, and we believe that the continued availability of
existing Rule 506(b) will be important for those issuers that either do
not wish to engage in general solicitation in their Rule 506 offerings
(and become subject to the requirement to take reasonable steps to
verify the accredited investor status of purchasers) or wish to sell
privately to non-accredited investors who meet Rule 506(b)’s
sophistication requirements.”

If you are trying to stay within 506(b, your solicitations must be
actually private and you must have substantial and substantive preexisting relationships.

Connect with Douglas Slain
LinkedIn: http://linkedin.com/in/douglasslain
Twitter: https://twitter.com/exemptofferings
Crowdfunding platforms: http://www.sanfranciscofunding.com
Blog: http://www.privateplacementadvisors.com/apps/blog
Email: [email protected]

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