If your company is looking to raise funds, you might want to consider new Rule 506(c), which allows companies to generally solicit investment in securities offerings. Even hedge funds and other pooled funds can take advantage of the opportunity to advertise their funds to investors.
The JOBS Act created the opportunity to generally solicit investment, but it also created some new obligations for those looking to take advantage of the chance to get in front of a greater number investors. The primary new burden is the requirement that securities issuers “take reasonable steps to verify” that an investor qualifies as an accredited investor. This heightened verification requirement means that the standard self certification letters will not suffice. Instead, investors will have to provide documentation proving that they qualify as accredited investors.
Many commentators think this verification requirement will prevent Rule 506(c) from being widely used. We disagree. One of the safe harbors to the verification requirement carved out by the SEC is an opinion letter from an attorney, CPA, or Broker-Dealer stating that they took reasonable steps to verify the investor, and determined that the investor qualifies as an accredited investor. iVLG is offering flat rate investor verification services for $50-$100 depending on whether it’s a net worth or income based verification.
If you can acquire funding without utilizing general solicitation, that may be the best course for you. But, for the vast majority of companies that expend great resources trying to secure capital, general solicitation may be an attractive option.Read more →