What is the key difference between Rule 506(b) and Rule 506(c) offerings?
- ARule 506(c) has a cap on the offering amount while 506(b) does not
- BRule 506(b) requires SEC registration while Rule 506(c) does not
- CRule 506(c) is only available to companies with revenue exceeding $10 million
- D506(c): solicitation plus verified accredited investors; 506(b): no solicitation✓ Correct answer
Why D — 506(c): solicitation plus verified accredited investors; 506(b): no solicitation
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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