Regulation D, Rule 506(b) is a provision of the U.S. Securities and Exchange Commission (SEC) that provides an exemption from the registration requirements of the Securities Act of 1933. This rule is commonly used by companies seeking to raise capital through the sale of securities, such as stocks or bonds, in private offerings.
Here are some key features and requirements of Regulation D, Rule 506(b):
Managers or deal sponsors can sell securities to 99 or 250 accredited investors (individuals or entities that meet specific income or net worth criteria) and up to 35 non-accredited investors who meet certain sophistication standards.
Managers are prohibited from general solicitation or advertising to promote the offering. This means they cannot advertise the investment opportunity to the general public but can only offer it those with whom they have substantially existing relationships.
Managers must file a Form D with the SEC within 15 days of the first sale of securities. This form includes basic information about the offering and the company.
Managers must also comply with state securities laws, known as "Blue Sky Laws." These laws vary from state to state and may impose additional requirements on the offering.
It's important for companies to ensure that they meet all the requirements of Rule 506(b) to qualify for the exemption from SEC registration. Failure to do so could result in legal and regulatory consequences.