Overview of SEC Rules Permitting General Solicitation in Reg D Private Offerings

The Securities and Exchange Commission (SEC) adopted rules on July tenth, two thousand and thirteen, to eliminate the prohibition against general solicitation and general advertising in certain securities offerings under Rule five hundred and six of Regulation D (Reg D) under the Securities Act of nineteen thirty-three, as mandated by the Jumpstart Our Business Startups Act (JOBS Act). These rules, effective since September twenty-third, two thousand and thirteen, provide significant opportunities for start-ups and private issuers to expand marketing activities in connection with private placements under Reg D. However, to comply with these rules, issuers must verify purchasers' status as accredited investors, leading to concerns within the investor community about providing sensitive financial information.

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Enhanced Verification Requirements Under Rule Five Hundred and Six (c)

Under new Rule five hundred and six (c), issuers can utilize general solicitation and advertising in offerings if they verify that all purchasers are accredited investors. This rule emphasizes a principles-based verification process, requiring issuers to consider various factors to ensure the adequacy of verification steps taken. These factors include the nature of the purchaser, available information about the purchaser, solicitation methods, and offering terms, such as minimum investment amounts.

Methods of Verification

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One. Income Verification: Reviewing IRS forms reporting a purchaser's income for the past two years, along with a written representation of a reasonable expectation to qualify as an accredited investor in the current year.

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Two. Net Worth Verification: Reviewing recent documentation (within three months) of assets and liabilities, such as bank statements and credit reports, with a written representation of full disclosure.

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Three. Third-Party Verification: Obtaining written confirmation from a registered broker-dealer, SEC-registered investment adviser, attorney, or CPA (Permitted Third Party Verifier) that reasonable steps were taken to verify the purchaser's accredited investor status within the prior three months.

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Four. Prior Investor Certification: For existing investors who were accredited at the time of their initial investment and remain investors at the time of the offering, obtaining a written certification of their accredited status.

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Purpose of Third-Party Certification

The proposed certification letter from trusted third-party advisors aims to alleviate concerns about disclosing sensitive financial information. It allows issuers to comply with verification obligations while protecting investors' privacy and ensuring regulatory compliance. This certification process adds an extra layer of assurance for both issuers and investors, contributing to the integrity and transparency of private offerings under Reg D.

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For further information or inquiries, please contact Hornet Corp at:

Address: 111 Imperial Blvd, Hendersonville, TN 37075

Email: info@hornetcorp.com

Phone: (888) 783-3099