{"id":43,"date":"2021-05-01T02:37:38","date_gmt":"2021-05-01T02:37:38","guid":{"rendered":"https:\/\/www.fglawgroup.com\/?p=43"},"modified":"2021-08-01T02:47:51","modified_gmt":"2021-08-01T02:47:51","slug":"dos-and-donts-for-rule-506b-offering","status":"publish","type":"post","link":"https:\/\/www.fglawgroup.com\/dos-and-donts-for-rule-506b-offering\/","title":{"rendered":"Do’s and Don’ts for Rule 506(b), Offering"},"content":{"rendered":"

A company must adhere to securities laws when raising capital.<\/span>\u00a0As previously\u00a0discussed<\/a>, all offerings of securities, must either be registered with the SEC or exempt from such registration.<\/span>\u00a0Private companies have the most common exemption from securities under Rule 506(b).<\/span>\u00a0Even if you have met the basic requirements of the exemption, there are still nuanced requirements that can be overlooked and could affect your ability to qualify under the exemption.<\/span>\u00a0An issuer, its officers and directors can face severe penalties if they fail to follow Rule 506(b).<\/span>\u00a0The SEC and state regulators have the power to initiate investigations, civil and administrative actions, enter orders and impose substantial monetary penalties. They can also transmit evidence to U.S. attorney general, who can take criminal proceedings.<\/span>\u00a0Buyers who violate securities registration requirements are entitled to rescission rights according to both federal and state laws.<\/span>\u00a0This blog post provides a list of best practices to conduct a 506 (b) offering. It is bullet-pointed for your convenience.<\/span><\/p>\n

Rule 506(b) Offering Procedures<\/span><\/h2>\n

Who Should Conduct an Offering<\/em>.<\/span>\u00a0The offering should only be conducted by the officers, directors, and employees of the company issuing securities, or registered broker-dealer.<\/span>\u00a0If they claim to be able to raise money for your company, they must not be associated with a broker-dealer.<\/span>\u00a0This could legally put you and your company in danger.<\/span><\/p>\n

Offeres<\/em>.<\/span>\u00a0Only persons or entities who meet the requirements below may be offered investment opportunities.<\/span><\/p>\n

    \n
  1. You believe they are accredited investors because they fall under one or more of the following categories:<\/span>\n