Series 7 practice questionmediumAlternative Investments — Private Placements
Under Rule 506(b) of Regulation D, how many non-accredited investors may participate in a private placement?
- AUp to 35 sophisticated non-accredited investors✓ Correct answer
- BNone — only accredited investors are permitted
- CUp to 100 non-accredited investors
- DThere is no limit on non-accredited investors
Explanation
Why A — Up to 35 sophisticated non-accredited investors
Rule 506(b) allows an unlimited number of accredited investors and up to 35 non-accredited investors, provided those non-accredited investors are "sophisticated" (having sufficient knowledge and experience in financial matters). When non-accredited investors participate, the issuer must provide more extensive disclosure. General solicitation and advertising are prohibited under 506(b).
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