My name is Tilden, Moschetti, securities attorney with the Moschetti syndication Law Group. Today we're going to do a deep dive into Regulation D Rule 506c and go line by line through the actual regulation itself to explain everything that's going on there.
When I was in law school, one of my professors told me a little secret about when there was anything that you were confused about what was going on, was go to the rule itself and understand that, and that will explain everything, which is why today I wanted to go through Rule 506c and another video, I already went through rule 506b, but it's useful to go through 506c in case that's one of the options that you are considering for your own syndication or fun. So let's go ahead and open up
the case of the law itself. So this is the text of Regulation D rule 506c you can see it's in book 17 of the Code of Federal Regulations, Rule 230.506 exemption with that exemption for limited offers and sales without regard to dollar amount or offering. So I've cut out a and b here. And so really, here's the law as of 506c. So first, we talk a little bit about the conditions that must be met in order for it to be a to fall under here. And there are some specific or there are
some general considerations. First, it must satisfy all the terms and conditions of two 30.5 of one and two, A and D. So those are here to 3501 is the where all the definitions and terms are described. Most importantly, probably for 506c people is that accredited investor definition under 501. A, we also have a video about that. And if you're more interested in finding out what an accredited investor is. Rule
502 is the general other general conditions that must be met. Now it says and 506c, that is A and D. So here we're talking about integration under a what that means is if let's say a fund, put together multiple offers, right? So it put together an offer this offer and then this offer and this offer, maybe they'd have one under 506 B and then one under 506c, it says that well, this is how we need to first determine whether those offers should be integrated. By integrated, of course we mean,
should they be considered one and the same. That's always a consideration of ours. And it's also important, especially if you're thinking, Well, I'm going to do a 506c, but I'd like to do a 506 B. Because if it becomes integrated, suddenly you've got a problem. You've got those people who came in on a 506 B, because you did it later. Maybe if it's integrated, then those people came in incorrectly because they saw your advertising. So integration is a big deal. 502d is limitations on
resale. I also did a video on the limitations of resale. Basically, you should not be buying this security in order to with the intent of selling it. It is not a speculative purchase, where you're looking to sell it into a market the SEC is not interested in you putting out offers where investors are going to create their own markets. So that is certainly true. So that is 506c one. There are specific conditions as well
that need to be addressed. But really, we're talking about one specific condition, the status of the investors must be accredited investors, we know that. So all investors must be accredited investors. Now how what further are they talking about? It's this. It's this verification of the accredited investor status. So that's what the SEC ultimately wants to do.
It's saying that yes, you can advertise or make a general solicitation of your offer it to the public out to the world, except that it must, you must have verification Should that this accredited investor is a, in fact an accredited investor. It is almost certain that the best way to do this is to rely on third parties to verify we in order to verify that they're an accredited investor, you the issuer must take reasonable
steps to verify that they are. Right the best way and the simplest way to prove that you've taken reasonable steps is to rely on third parties. So that means in this case, a written confirmation. This and this under see is just an example, a written confirmation from somebody such as a registered broker dealer who has a knowledge about whether or not they are a an accredited investor, or an investment advisor registered with the Securities and Exchange
Commission. This could be somebody who's their registered investment advisor, there are IA, who has knowledge of what their account status is, and whether or not they are a accredited investor, a licensed attorney can say whether or not they are now the attorney needs to know that person and needs that be knowledgeable about the fact that they are, for example, I have written a letter to like this for not for clients and not
for investors, but for investors that I knew. And I looked over their accounts, and I verified that they were in fact, accredited investors under the rule of 501. A, that they qualified for that. And so I felt comfortable writing a letter that confirm that, in my opinion, this person is an accredited investor under Rule 506. A and would therefore
invest in a an an offering that was under Rule 506c. Lastly, is a certified public accountant who's duly registered as well, they may have those same, that same kind of knowledge, they should have that from the investor or from their workings with that investor of their financial position to be able to determine that they are in fact a credited investor. Those are just some of the ideas on what that the SEC gives in terms of what it is, there are companies that also give up certification
of that person being an accredited investor are not. Now in order to be compliant with that almost all of them will have an attorney on staff or a accountant on staff, who also supervises the work to verify in their opinion that they are an accredited investor. And then they issue that certificate,
which can be sent to you as the sponsor of the security. This is the deep dive into Rule 506c you can see there's actually not a lot going into it a under Rule 506c, you can raise an unlimited amount of money, you can raise over you can raise up to a year
or longer if you extend it. But what you have to do is make sure that you qualify that we're talking about accredited investors, that you obtain this verification of their accredited investor status, and that they know also that they that there are these limitations on resale, and that there is a possibility that offers could be integrated with each other. And so you need to consider what that what effect would have on yours. My
name is Tilden Moschetti. I am a securities attorney with the Moschetti syndication Law Group. I put together a lot of Reg D 506c offerings for syndicators for funds for businesses, all sorts of things in order for them to be able to raise capital legally without registering with the SEC. They only are making a filing under Regulation D if I can help you please feel free to get in contact with me and we can have a conversation and see if I can help you