Series 7 practice questionmediumAlternative Investments — Private Placements
A key difference between Rule 506(b) and Rule 506(c) of Regulation D is that:
- A506(c) permits general solicitation but requires all purchasers to be verified accredited investors✓ Correct answer
- B506(c) has a lower fundraising cap
- C506(b) requires SEC registration while 506(c) does not
- D506(b) allows general advertising while 506(c) does not
Explanation
Why A — 506(c) permits general solicitation but requires all purchasers to be verified accredited investors
Rule 506(c), added by the JOBS Act in 2013, allows issuers to use general solicitation and advertising to market the offering, but ALL purchasers must be accredited investors, and the issuer must take reasonable steps to verify their accredited status. Under 506(b), no general solicitation is permitted, but up to 35 non-accredited sophisticated investors may participate.
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