Reg. D 506(b) Advertising

13 Replies

The following is from the SEC's website re: 506(b):

“General solicitation” includes advertisements published in newspapers and magazines, public websites, communications broadcasted over television and radio, and seminars where attendees have been invited by general solicitation or general advertising. In addition, the use of an unrestricted, and therefore publicly available, website constitutes general solicitation. The solicitation must be an “offer” of securities, but solicitations that condition the market for an offering of securities may be considered to be offers.

I understand speaking with a securities attorney is the best idea but was wondering if anyone could shed light on what can and can not be on your website if you intend to use the 506(b) exemption? 

Brandon - I would talk with your attorney on this issue. It has been a long time since I did anything with securities but I always learned that when it comes to advertising it is always best to err on the side of caution. Too many people have gotten into trouble with a simple mistake in wording which opened the door to a claim under the securities act.

That being said, if you study a number of websites, you can probably find disclaimer language that they use on their website to limit liability and indicate that it is meant for advertisement purposes and not an offer to sell securities.   If you find language on other sites you like, make sure to run it by your securities attorney first to make sure that it has all the required language you would need in a disclosure.  

@Brendan Kelly I am not an attorney, on your website though you shouldn't have any copy or content that can be interpreted as an offer.

If you are going the 506(b) route, you need to establish a pre-existing relationship before presenting an offer. Best way to attract leads on your website is to create a relationship by educating first with solid content or a free report, video, webinar, newsletter, etc.

@Jillian Sidoti @KimLisa Taylor , any guidance?

@Brendan Kelly

Under RUle 506(b), you must have a substantive pre-existing relationship. A "substantive pre-existing relationship" in the eyes of the law is an "intimate knowledge of one's financial ability to invest." This is accomplished with, generally speaking, an investor qualification form. I hope this helps.

Things on your website:

1. Who you are 

2. What you do

3. Educational Materials

What should NOT be on your website: 

1. Over offers or requests for money

2. Words like "guarantee, low risk, safe, secure"

3. Offers of certain returns.

@Brian Adams @Jillian Sidoti - thank you for the guidance.  

Where I'm not totally clear on the SEC guidelines is whether you can state "we partner with qualified passive investors" or "our goal is the achieve outsized risk-adjusted returns for our investors". In my mind, these statements say "what we do" and "what our goal is" but wonder if it could be misconstrued as "requests for money" and "offers of a certain return".   

You should not post current deals that you have going on, but can post deals that have happened already. You should probably post a disclaimer under that as well.

If you are planning to do 506( b) offerings, think of your website more like a company brochure than a prospectus and err on the side of caution - it's a place where people you meet in person can go to get more information about you and your team. 

Beware of posting past deals (which are considered tombstone ads), as they may be construed as conditioning investors for future investments, and thus, the first step in making an offer.

This is a case where an ounce of prevention is worth a pound of cure. Having a securities attorney review your website before it goes live could save you a lot of grief later on.

@KimLisa Taylor thank you for the direction.  I wasn't aware of past deals being advertisements but that makes sense. Great idea having an attorney do a quick review. 

HI @Brendan Kelly - Todd is right. The best way to go is talk about PAST deals. But also be careful with that and make sure what you are saying about the past deals is truthful (for example, don't post a deal you have a partial interest in as if you are THE owner.) 

I would spend an hour with a securities attorney to go over your website with you once it is up and running. A good attorney won't tell you HOW to put your website together but will help you construct what you have already created into a proper "legal" format. Hope this helps. 

Thanks @Jillian Sidoti .  Honesty and transparency above all else.  I will definitely consider having an attorney review.  Thanks again for all the direction.  

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