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Regulatory Framework Rubric: 506c – 506b – Reg CF
| Rule 506(b) | 506(c) | Reg CF | |
| Permitted Investors | Accredited investors and up to 35 non-accredited investors. As long as the non-accredited investors are “sophisticated.” | Accredited investors only. | Anyone |
| Verification of Accredited Investors | Verification of Issuer may rely on a statement by the investor to reach a reasonable belief that he, she, is accredited. | The issuer must verify that investors are accredited, typically using a third party like Verifyinvestor. | An issuer may rely on a statement by the investor to reach a reasonable belief that he, she is accredited. |
| Dollar Limits | · No limit on the amount raised· No limit on how much each investor can invest | · No limit on the amount raised· No limit on how much each investor can invest | · (i) The limit is $5M per year, and (ii) this limit applies to all issuers under common control· Investment amount limits for non-accredited investors based on income and/or net worth· No investment amount limits for accredited investors |
| Total Number of Shareholders | In general, any company with more than 500 non-investors or more than 2,000 total investors must become a full“reporting company” under the Exchange Act. | In general, any company with more than 500 non-investors or more than 2,000 total investors must become a full“reporting company” under the Exchange Act. | Unlimited if certain conditions satisfied |
| Information Required | · If the offering includes only accredited investors, no information is required by law, although we include information anyway to inform investors and avoid Rule 10b-5 liability.· If the offering includes even one non-accredited investor, the law requires that the issuer provide lots of information, | No information is required by law, although we includeinformation anyway to inform investors and avoid Rule 10b-5 liability. | The information must be submitted in the Form C. |
| SEC Registration | No | No | No |
| State Registration | No | No | No |
| Pre-Sale Filings | None | None | Form C |
| Post-Sale Filings | Form D to the SEC.Corresponding forms to each State where an investor lives. | Form D to the SEC.Corresponding forms to each State where an investor lives. | Same information as in initial filing to be filed yearly |
| Advertising | No advertising of actual deals permitted. Sales may be made only to investors with whom the issuer has a pre-existing relationship. | Advertising of any kind is allowed. Internet, TV, radio, leaflets dropped from planes, anything. | Unlimited advertising is allowed on the portal; advertising elsewhere is subject to restrictions. |
| Sold Through Portals | Permitted, but not required | Permitted, but not required | Required |
