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The New Rules for the Public Solicitation for Funding

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The New Rules for the Public Solicitation for Funding

  1. 1. NEWPUBLI C SOLI CI TATON FOR FUNDI NG RULES © Hool Law Group, PLC mhool @hool l awgroup.com (602) 852-5560
  2. 2. Disclaimer: Not Legal Advice/Educational Purposes Only
  3. 3. I MPORTANT BASI CS •Fed/State •Concerns: (1) Registration/ Exemption; (2) Disclosure; 3) Licensing •Consequences of Non-Compliance: (1) Criminal; (2) Civil; (3) Personal
  4. 4. HOWWE DO I T NOW • Section 4(a)(2) • Rule 506(b) of Regulation D • “Accredited” Investors (Self-certification) • PRIVATE: No General Solicitation • “Wrapper”/Private Placement Memorandum
  5. 5. NEWRULE 506(c) • PUBLIC?: Solicitation of Public Allowed • Conditions: • (1) AI or “Reasonable Belief” • (2) Reasonable Steps to Verify • (3) All 501, 502 Satisfied
  6. 6. “REASONABLE STEPS” GUIDANCE FACTORS: • Nature of purchaser (BD or Person) • Info on hand (e.g., public co exec?) • Nature of offering (mass mail/social media + low investment = high standard)
  7. 7. “REASONABLE STEPS” THESE SATISFY: • IRS forms (2 yrs) + representation • Bank/brokerage statements w/in 3 mos + report consumer agency on liabilities • Third Party Certification (BD/Attny/CPA) (no check-the-box)
  8. 8. BAD ACTOR DI SQUALI FI ES • “Covered” Persons (Issuer + Others) • D/Q Events (10 yr/5 yr) • Diligence Standard/Records • Certify on New Form D
  9. 9. FUTURE RULES? • Form D 15 days before GS/30 days after • Form D—how GS, how verified AI, Other • 1 yr ban if fail Form D • Legends on GS • 2yrs—file GS on day used (Co ban if fail)
  10. 10. I SSUES/WHAT TO DO? • Integration • Failed 506(c) vs. failed 506(b) • Window of opportunity? • Start with (b) then go to (c)? • Questionnaires/Records and Privacy • Platforms

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