Douglas Slain

Crowdfunding on Steroids: General Solicitation Under Rule 506 (C) Douglas Slain

Publisher Marketing: The new Rule 506 changes everything. The SEC has lifted an 80-year ban on general solicitation. Start-ups for the first time can use public advertising to sell private offerings. The new Rule 506 may prove to be the answer to the prayers of star-ups frustrated with existing fund sourcing platforms. But it also has hidden dangers that will cause many issuers to continue to use the "old Rule 506" [506(b)]. Among the new Rule 506 strengths: The amount that can be raised is unlimited There is no requirement for review of the offering under any Blue Sky laws (state securities regulations) There is no review of the offering by the SEC Solicitations can be online or offline Solicitations can be made to anyone! Sales (as opposed to solicitations) must be to accredited investors, and issuers must be able to verify that any actual investor is "accredited." Also, proposed rules will require issuers to send the SEC all marketing copy; as of this writing, however, there is no need to send copies of solicitation materials to the SEC (or to state regulators). Soon you will start to see: Emails asking if you might be interested in learning about investing in someone's project Videos of founders and entrepreneurs soliciting your interest in their projects Links on websites inviting you to click through to learn more about an investment Mobile apps with increasingly creative solicitation Contributor Bio:  Slain, Douglas The author, Douglas Slain, has managed a popular blog, regDconsumersreport.com, since 2009. Doug served as the secured transactions adviser to the Ministry of Economy for the Republic of Latvia and he taught secured transactions and real estate law as an adjunct law professor at Stanford Law School. He also served as the chair of the American Bar Association's' General Practice Section's Professional Responsibility Committee for two terms.