Regulation D, Rule 506 Securities Lawyer 101- Go Public Blog To offer and sell securities in the United States, an issuer must comply with the registration requirements of the Securities Act of 1933, as amended (the Securities Act), or must offer and sell the securities pursuant to an exemption from the registration statement requirements. A commonly used private offering exemption is Rule 506 of Regulation D. Rule 506 is a non-exclusive safe harbor for the statutory exemption provided by Section 4(2) of the Securities Act. The Rule 506 exemption is often used by issuers who engage in go public direct transactions and conduct underwritten and direct public offerings. The legal and compliance costs of Rule 506 offerings are less than those of offerings registered with the Securities and Exchange Commission (SEC) because only a notice filing on Form D is required to be filed with the SEC.Issuers conducting direct public offerings often file a registration statement with the SEC to register the resale of the securities sold in Rule 506 offerings. Registration of the resale of the securities sold in Rule 506 offerings enables the issuer to qualify for the assignment of a ticker symbol from FINRA assuming the issuer obtained at least twenty five purchasers,Oakley Sunglasses Outlet. Filing a resale registration statement also prevents many of the problems reverse merger issuers encounter in obtaining approval from Depository Trust Company (DTC) for electronic trading.Unlike Rule 504, both SEC reporting and non-reporting issuers can offer and sell securities in reliance upon 506 offerings. The basic Rule 506 requirements are:Dollar Amount That May Be Sold Rule 506 does not limit the amount of capital an issuer can raise.Number of Shares Permitted Rule 506 does not limit the number of shares that an issuer may offer or sell.Manner of Offering Rule 506 requires that the offering be private. An issuer cannot use general solicitation or advertising to market the securities offered and must have a pre-existing relationship to any investor solicited.Maximum Number of Investors Although Rule 506 does not limit the number of accredited investors that an issuer may sell its securities to,Cheap Oakleys, it does limit the number of offers and sales to non-accredited investors. Issuers may offer and sell securities to as many as 35 non-accredited investors in a Rule 506 offering and they must reasonably believe that the non-accredited purchaser, either alone or with their purchaser representative, is a sophisticated investor with sufficient knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the issuers securities.The Information Requirements Application of the Anti-Fraud Provisions Regardless of the type of information provided, the anti-fraud provisions apply to any information furnished to investors.Opportunity to Ask Questions An issuer must give each purchaser, at a reasonable time prior to purchase, the opportunity to ask questions and receive answers concerning the terms and conditions of the offering, and the issuer must obtain any information that is necessary to verify the accuracy of the information furnished to the investor if the issuer possesses or can acquire such information without unreasonable effort or expense.Accredited Investors Issuers are not required to furnish any specific information to accredited investors. An accredited investor is any natural person whose individual net worth, or joint net worth with that persons spouse, exceeds $1,000,000. Except for certain narrow exceptions, for purposes of calculating net worth under this paragraph:(i) The persons primary residence shall not be included as an asset;(ii) Indebtedness that is secured by the persons primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such outstanding indebtedness at the time of the sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and(iii)Indebtedness that is secured by the persons primary residence that is in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability.Non-Accredited Investors of Non-Reporting Issuers If an issuer is not required to file periodic reports under the Securities Exchange Act of 1934 then it must furnish non-accredited investors with the same kind information as required by a Regulation A offering statement.Non-Accredited Investors of Reporting Issuers If an issuer is required to file periodic reports under the Securities Exchange Act of 1934 then it must furnish non-accredited investors with the same kind information as required by a registration statement to be filed under the Securities Act.Financial Statement InformationOfferings up to $2,000,000 The financial statements which include:(i) balance sheets as of the end of each of the two most recent fiscal years (or as of a date within 135 days if the issuer has existed for less than one year), however, only the balance sheet, dated within 120 days of the start date of the offering, must be audited;(ii) statements of income, cash flow and changes in stockholders equity for each of the two years preceding the date of the most recent audited balance sheet (or such shorter period as the issuer has been in business); and(iii) interim financial statements as of the end of the issuers most recent fiscal quarter.Offerings up to $7,500,000 The same financial statements required to be furnished in offerings up to $2,000,000, but the financial statements must be audited.Offerings over $7,500,000 The issuer must provide the financial statements required to be filed in a registration statement.Form D Filing An issuer must file a notice of sale on Form D with the Securities and Exchange Commission no later than 15 days after the first sale of securities in the offering.Rule 506 will continue to be a viable exemption for issuers who go public direct and undertake underwritten and direct public offerings. Because only a notice filing on Form D is required, the legal and compliance costs are minimal in comparison to the costs of other offerings.This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings.