Rule 506 General Solicitation

FD Financial, Inc. specializes in consultant small business marketing to find accredited investors and offering structures form one million to five million dollars.

There’s a change in the air with Rule 506 General Solicitation

Now your small business does not have to be a publicly traded company to offer and raise millions of dollars from the general public. The Securities and Exchange Commission took long-awaited action in the area of private offerings at its open meeting on July 10, 2013. The Commission issued two releases adopting final rules (i) to eliminate the prohibition against general solicitation and general advertising in offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act of 1933, provided, among other things, that all of the purchasers of the securities are “accredited investors” and (ii) to disqualify felons and other “bad actors” from such offerings.  These measures were undertaken to comply with mandates in both the Jumpstart Our Business Startups Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The new rule became effective September 23, 2013.

What does this mean to the small business? Your company can now have an offering under the new rule “506 C” and reach out through general solicitation or advertising to the 7.2 million accredited investors in the US. There was a time when entrepreneurs had to do an enormous amount of networking to find one qualified investor. This slow process meant that the vast majority of qualified investors never heard about the opportunity to invest in a great “A” round. Only about 3% or 180,000 of the 7.2 million accredited investors in the US are active angels, and those angels invest $21 billion each year. General solicitation will enable entrepreneurs to broadcast investment opportunities far and wide, giving those millions of investors a chance to find out about your startup or business opportunity.

  • If you’re interested in the new rule 506 c
  • If your company needs to raise from 1-5 million
  • If you’re not interested in paying a broker or platform 4-10% of your raise
  • If you’d like to market your offering to 7.2 million accredited investors


Regulation A

On March 25, 2015, the Securities and Exchange Commission (the “Commission”) adopted final rules to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act by expanding Regulation A into two tiers: Tier 1, for securities offerings of up to $20 million in a 12-month period; and Tier 2, for securities offerings of up to $50 million in a 12-month period. An issuer of $20 million or less of securities can elect to proceed under either Tier 1 or Tier 2. The final rules for offerings under Tier 1 and Tier 2 build on current Regulation A and preserve, with some modifications, existing provisions regarding issuer eligibility, offering circular contents, testing the waters, and “bad actor” disqualification. The final rules modernize the Regulation A filing process for all offerings, align practice in certain areas with prevailing practice for registered offerings, create additional flexibility for issuers in the offering process, and establish an ongoing reporting regime for certain Regulation A issuers.

Under the final rules, Tier 2 issuers are required to include audited financial statements in their offering documents and to file annual, semiannual, and current reports with the Commission on an ongoing basis. With the exception of securities that will be listed on a national securities exchange upon qualification, purchasers in Tier 2 offerings must either be accredited investors, as that term is defined in Rule 501(a) of Regulation D, or be subject to certain limitations on their investment. The requirements for Tier 1 and Tier 2 offerings are described more fully below.

Scope of Exemption

Understanding the scope of the exemption is important because not all issuers are eligible to conduct offerings pursuant to Regulation A. Additionally, there are limitations on the types of securities that may be sold and on the amount of securities that may be sold by the issuer and selling securityholders, as well as other issues that may affect the issuer’s offering process pursuant to the exemption.

a. Eligible Issuers and Securities
Regulation A is available only to companies organized in and with their principal place of business in the United States or Canada. It is not available to:
• companies subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act;
• companies registered or required to be registered under the Investment Company Act of 1940 and BDCs;
• development stage companies that have no specific business plan or purpose or have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies (often referred to as, “blank check companies”);
• issuers of fractional undivided interests in oil or gas rights, or similar interests in other mineral rights;
• issuers that are required to, but that have not, filed with the Commission the ongoing reports required by the rules under Regulation A during the two years immediately preceding the filing of a new offering statement (or for such shorter period that the issuer was required to file such reports);
• issuers that are or have been subject to an order by the Commission denying, suspending, or revoking the registration of a class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five years before the filing of the offering statement; and
• issuers subject to “bad actor” disqualification under Rule 262.

The final rules limit the types of securities eligible for sale under Regulation A to the specifically enumerated list in Section 3(b)(3) of the Securities Act, which includes warrants and convertible equity and debt securities, among other equity and debt securities. The final rules exclude asset-backed securities from the list of eligible securities.

Call me.  I’m Rudy W. De La Garza President and CEO of FD Financial, Inc.
Monday –Friday CST 9:30-5 PM. My direct number is 210-861-8353


updated May 22, 2018