/ Uncategorized / By Alberto A
๐ช๐ต๐ฎ๐ ๐ถ๐ ๐ฎ ๐ฟ๐๐น๐ฒ ๐ฑ๐ฌ๐ฒ(๐ฏ) ๐ผ๐ณ๐ณ๐ฒ๐ฟ๐ถ๐ป๐ด?
A 506(b) offering, originally called rule 506, is a type of offering that allows a company to raise as much money as they want from as many investors as they want. However, most of these investors must be accredited investors. Only 35 of these investors can be non-accredited.
๐๐๐ ๐๐ต๐ฎ๐ ๐บ๐ฎ๐ธ๐ฒ๐ ๐ฎ๐ป ๐ถ๐ป๐๐ฒ๐๐๐ผ๐ฟ ๐ฎ๐ฐ๐ฐ๐ฟ๐ฒ๐ฑ๐ถ๐๐ฒ๐ฑ?
For individuals, accredited investors are those who:
Additionally, when an offering is filed under rule 506(b), investors can self-verify their accreditation status. As weโll see in a 506(c) offering, investors will have to be verified by a third party in that case.
In addition, rule 506(b) prohibits companies from advertising their securities to the public. They can advertise their company but they canโt advertise specific deals or publicize specific offerings.
If someone has met and spoken with an investor multiple times, they can discuss an offering. You must have a real relationship with someone before you can present a deal.
๐ช๐ต๐ฎ๐ ๐ถ๐ ๐ฎ ๐ฟ๐๐น๐ฒ ๐ฑ๐ฌ๐ฒ(๐ฐ) ๐ผ๐ณ๐ณ๐ฒ๐ฟ๐ถ๐ป๐ด?
In 2012, rule 506(c) was created, allowing companies to advertise their offerings and not just their company.
Only accredited investors are allowed to invest under rule 506(c) with no exceptions, and investors must be verified by a third party. This can be done by the investor providing a copy of their W-2s or their tax returns. Otherwise, the investor can ask a professional such as an accountant or lawyer to inform the offering issuer that the investor is accredited.
๐ฃ๐ฟ๐ผ๐ ๐ฎ๐ป๐ฑ ๐๐ผ๐ป๐
๐ฅ๐๐น๐ฒ ๐ฑ๐ฌ๐ฒ(๐ฏ)
๐ฃ๐ฟ๐ผ๐
๐๐ผ๐ป๐
๐ฅ๐๐น๐ฒ ๐ฑ๐ฌ๐ฒ(๐ฐ)
๐ฃ๐ฟ๐ผ๐
๐๐ผ๐ป๐
๐ช๐ต๐ถ๐ฐ๐ต ๐ผ๐ป๐ฒ ๐ถ๐ ๐ฏ๐ฒ๐๐?
In conclusion, it ultimately comes down to what you are looking for and what you have. If you are a company that has a relationship with a set group of investors, rule 506(b) is likely for you because you already have people who trust you. But if you are a smaller company needing to raise capital, rule 506(c) can help you find investors by advertising your deal. appealing to potential investors wanting to make a profit.
Today, the majority of companies follow rule 506(b). However, rule 506(c) is a way for smaller companies to attract investors even if they donโt have a relationship with them.
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