At issue for the startup was the fact that
it allows unaccredited investors to lend money, which could have qualified the company as a securities dealer.
Not exact matches
Scammers cometh: Randy Shain, founder of BackTrack Reports and investigative due diligence expert, predicts that with the SEC's decision to
allow the solicitation of capital from
unaccredited investors will come a new wave of scammers.
That particular provision of the legislation would
allow businesses to give away pieces of their company to
unaccredited investors in exchange for cash, or equity crowdfunding.
As such, most 506 (b) offerings are only sold to accredited
investors (even though the Rule
allows for the sale of up to 35 non-accredited
investors), as the sale to any
unaccredited investors requires significantly heightened disclosure to such
investors, which can be costly and burdensome to provide, and may increase the exposure of an issuer to liability under federal and state securities acts.
Do a Regulation Crowdfunding offering for the
unaccredited investors and at the same time a Title II offering, which
allows for general solicitation of accredited
investors and does not have the $ 1 million cap.
There are several other pertinent restrictions related to this exemption, such as a prohibition on general solicitation and a cap on the number of
unaccredited investors allowed in an offering.
It is an easier form of raising money as it
allows you to raise money from
unaccredited investors without the myriad legal issues that often arise with these
investors.
Since 2010, we've used Regulation A to
allow more than 1,200
unaccredited investors to participate in private real estate offerings — many for the first time ever.