Crowdfunding on Steroids

By Private Placement Handbook Series

The new Rule 506 changes everything. The SEC has lifted an 80-year ban on general solicitation and start-ups and other Issuers 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 startups 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

Investment funds now will have access to a much wider pool of potential investors than before, subject to separate rules and regulations promulgated by their own, separate regulators.

• Language: English
• Publisher: Private Placement Handbook Series
• Release date: Sep 6, 2014
• ISBN: 9781310661266

Private Placement Handbook Series

After getting a JD from Stanford Law School, a MA from the University of Chicago, a diploma from the University College London, and working as a reporter for The Wall Street Journal, Doug was a member of the California bar for 40 years, during which time he founded a series of law reporting services now owned by Thomson-Reuters. Doug specializes in debt and equity crowdfunding. He helps small business identify and solicit sources of private equity. Doug monitors a LinkedIn discussion group, State Securities Regulation, with 1500 members. Connect with Douglas Slain: LinkedIn: http://linkedin.com/in/douglasslain Facebook: http://facebook.com/douglas.slain Twitter: https://twitter.com/exemptofferings Blog: http://www.privateplacementadvisors.com/apps/blog Web site: http://privateplacementadvisors.com

Book preview

Crowdfunding on Steroids

GENERAL SOLICITATION UNDER NEW RULE 506

Douglas Slain

~~~

Smashwords Edition

Copyright © Litigation Research Group 2013

PUBLISHER: Litigation Research Group

First Edition

Published August 22, 2013

Smashwords Edition, License Notes

This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

TABLE OF CONTENTS

CHAPTER ONE: New Rules

CHAPTER TWO: Rule 506 Questions and Answers

CHAPTER THREE: Funding

CHAPTER FOUR: Private Placements

CHAPTER FIVE: Regulation D

CHAPTER SIX: S Corporation or C Corporation or Limited Liability Corporation?

CHAPTER SEVEN: Partnerships

CHAPTER EIGHT: Summary

Exhibit A: Engagement Letter (Immigration law firm and Private Placement Advisors)

Exhibit B: Opinion Letter to Confirm Accredited Investor Verification

About the author

About the publisher

CHAPTER ONE: New Rules

The new Rule 506 changes everything.

The SEC has lifted an 80-year ban on general solicitation and start- ups and other Issuers for the first time can use public advertising to sell private offerings. Startups are now able to use advertising and general solicitations to fund private placements!

The new Rule 506 may prove to be the answer to the prayers of startups 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.

Among the new Rule 506 strengths, observe:

• 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 the following:

• 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

Private placement memorandum and related offering documents continue to be mandatory.

Investment funds now will have access to a

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