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Series 79 practice questionmediumRegulation D

What is the key difference between Rule 506(b) and Rule 506(c) offerings?

  1. ARule 506(c) has a cap on the offering amount while 506(b) does not
  2. BRule 506(b) requires SEC registration while Rule 506(c) does not
  3. CRule 506(c) is only available to companies with revenue exceeding $10 million
  4. DRule 506(c) permits general solicitation and advertising but requires all purchasers to be verified accredited investors, while Rule 506(b) prohibits general solicitation but allows up to 35 non-accredited investors✓ Correct answer
Explanation

Why D — Rule 506(c) permits general solicitation and advertising but requires all purchasers to be verified accredited investors, while Rule 506(b) prohibits general solicitation but allows up to 35 non-accredited investors

The JOBS Act of 2012 created Rule 506(c), which permits issuers to use general solicitation and advertising to market their private placement offerings, a significant departure from traditional private placement rules. However, the trade-off is that all purchasers must be accredited investors, and the issuer must take reasonable steps to verify accredited investor status (not just rely on self-certification). Rule 506(b) maintains the traditional prohibition on general solicitation but allows up to 35 sophisticated non-accredited investors to participate.

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