New SEC Rule 506(c) Allows General Solicitation as Long as “Purchasers” are “Accredited Investors”

The Securities and Exchange Commission has published its final rules eliminating the prohibition against “general solicitation”. It created a new section to Rule 506, Rule 506(c) which provides that an exemption from the registration requirements is available even if an issuer uses general solicitation so long as all “purchasers” are “accredited investors”. The SEC has also required that issuers take “reasonable steps” to confirm “accredited investor” status. However, they did not provide any specific criteria to be relied upon. In the short term, issuers should proceed with caution in attempting to rely on Rule 506(c).

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