Is Rule 506 A Good Option For You?

If used correctly, Rule 506, Regulation D of the Securities Act of 1933, is a powerful tool that can help companies issue securities to investors.

Under normal restrictions on securities offerings, securities issuers must register with the U.S. Securities and Exchange Commission (SEC) if they want to advertise for investors in newspapers, on the Internet and through other media.

Rule 506, however, has provided an exemption to this requirement, allowing securities issuers to advertise and solicit investors if those investors meet certain criteria. The rule is attractive to securities issuers who want to save time and money when offering securities.

Changes To Rule 506

The SEC recently amended Rule 506 to relax the criteria for investor eligibility. The changes, which the U.S. Congress mandated as part of the Jumpstart Our Business Startups Act (JOBS Act) of 2012, are intended to lower the barriers for securities issuers to find investors and raise capital. While subtle, these changes to Rule 506 are important.

Under the amended rule, securities issuers may solicit and advertise securities provided the sales are limited to accredited investors and that the issuers take reasonable steps to verify all purchasers are accredited.

In other words, securities issuers may seek investors without restriction. The catch is the issuers must screen potential purchasers to ensure they meet SEC criteria for accredited investors.

Your Advisor On Rule 506

Lerman Law Associates, P.C., in Kennesaw, Georgia, advises clients in Cobb County, the Atlanta area and beyond on issues relating to corporate capital fundraising, including Rule 506. Our founding attorney, Craig Lerman, has the skill and knowledge necessary to help you use Rule 506 correctly.

How To Contact Lerman Law Associates, P.C.

Attorney Craig Lerman prides himself on building long-term relationships with clients. After assisting you with Rule 506, he can help you resolve your ongoing legal needs. For a free initial consultation, contact the firm online or call 678-888-5773 or 866-717-0393.