Starting in mid-2009 through February 2010, this column discussed the securities law considerations in connection with the offer and sale of unregistered real estate securities using the Internet. In light of changes in Regulation D in July 20131 which eliminated the ban on general solicitation and general advertising (General Solicitation) of securities offerings conducted under Rule 506(c), the last column2 reviewed the relevant changes adopted by the Securities and Exchange Commission (SEC) as applicable to a private offering using the Internet where General Solicitation is involved. This column will review Rule 506(b) and recent SEC guidance on Rule 506(b) Internet offerings. Rule 506(b) is applicable to a private offering where no General Solicitation is used.
Overview of Rule 506(b)
Section 4(a)(2) of the 1933 Act provides for an exemption from the registration requirements of the 1933 Act for “transactions by an issuer not involving any public offering.” The SEC and the courts have taken the position that whether a transaction is one not involving any public offering is essentially a question of fact and necessitates consideration of all surrounding circumstances, including the relationship between the offerees and the issuer, the nature, scope, size, type and manner of the offering.3
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