Rule 506(c) is an exemption from registration under the Securities Act of 1933 for the offer and sale of securities. It is a relatively new rule in the US and was adopted by the SEC in 2013 on the back of the JOBS Act of 2012.
The rule permits issuers to broadly solicit and generally advertise an offering, provided that:
- all purchasers in the offering are accredited investors;
- the issuer takes reasonable steps to verify purchasers’ accredited investor status; and
- certain other conditions in Regulation D are satisfied.
Securities sold in Rule 506(c) offerings are “restricted securities,” which generally means that they are subject to holding periods before sales are permitted.
A company that conducts a Rule 506(c) offering is required to file a notice with the SEC on a Form D within 15 days after the first sale of securities in the offering. State securities laws also apply, although not with respect to state registration and qualification requirements.
How does Rule 506(c) differ from Rule 506(b)?
Rules 506(b) and 506(c) both fall within Regulation D of the Securities Act. Rule 506(b) involves a private placement of securities and can be sold to up to 35 sophisticated, non-accredited investors, whereas Rule 506(c) offerings can be offered to anyone but only sold to accredited investors.