Friday, August 16, 2013

Tweeting Your Way to Securities Fraud in 140 Characters: What Do you Say in SEC Rule 506 (c) Advertising in Private Placements?

By Jim Verdonik
I'm an attorney with Ward and Smith PA. I also write a column about business and law for American Business Journals, have authored multiple books and teach an eLearning course for entrepreneurs. You can reach me at or Or you can check out my eLearning course at or or you can purchase my books at

Have you ever wanted to say something in a meeting or on a conference call, but by the time you get other people's attention, you didn't know what to say?
Embarrassing isn't it?
Clients have asked me for decades:
  • "Why can't I advertise in my private placement?" 
  • "How am I supposed to raise capital, if I don't already know investors?" 
Be careful what you wish for. 
New SEC Rule 506 (c) allows you to advertise for accredited investors in a private placement, if you meet the accredited investor verification requirements of Rule 506 (c).  So, I ask you:
  • What do you want to say?
  • How will you say it?
  • Will you use traditional advertising? 
  • Or will you rely primarily on social media?
  • How does your choice of advertising media affect what you say and how you say it?
Of course, social media would be dead if people really were at a loss for words.  We never seem to run out of words.  But any sampling of social media will turn up clear examples of people's words getting far out in front of their brains.   
We often warn teenagers to think before they say something in social media, because they are creating a permanent record that people will use to judge them.  Their career might be hurt by something they said when they were 17 years old, or when they are frustrated with their boss or are just exercising their right to pursue happiness (a/k/a partying).
Sometimes social media mistakes are OK.  Your world doesn't always end.  You might be embarrassed for a day, but then you and everyone else moves on to more pressing matters.  Your friends have incentives to forgive and forget, because they know that they might make a similar mistake tomorrow.
But before you begin to raise capital through the media, ask yourself:
  • Will the SEC and state securities regulators accept your mistakes like forgiving friends do?
  • Will the SEC and state securities regulators scrutinize and penalize your mistakes like a prospective employer would?
Why should you care about what the SEC and state securities regulators think?
You won't be advertising your private placement to please the SEC.  You advertise to raise capital.  But the SEC and state securities regulators carry big sticks.  They can make it impossible for you to raise capital.  They can kill your business.  If they think you are really trying to commit fraud instead of just making an honest mistake, they can even put you in jail. 
So, we'll talk about how you do an effective job of selling while avoiding the biggest securities pitfalls.
Scope of this Article
In July 2013 the SEC made the biggest changes to private placement capital raising rules since the SEC issued Regulation D more than three decades ago.
This article explores:
  • How do you decide what do you want to say in your advertisements?
  • How do you say it generate sales?
  • How do you say it to comply with securities laws?
  • Can you combine effective selling with securities law compliance?
  • Or do you have to choose one or the other?
See the end of this article for links to other articles about these Rule 506 changes.

Advertising and SEC Anti-Fraud Rules – Don't let 140 Characters Tweet you to Jail
If you decide you are going to advertise to sell securities, you have to do two things.

  • Comply with the technical requirements of new SEC Rule 506 (c).
  • Adapt your advertising to fit into the basic principles of securities laws.
We talk about the technical requirements of Rule 506 (c) in the other articles we referred to above. 

Back to the Basics – Three Roads to Fraud
Let's begin trying to understand how to avoid committing securities fraud in your advertising by reviewing the basic definition of securities fraud.  Here's the full text of SEC Rule 10b-5:
"It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security."
Securities lawyers often focus on the material facts part of the Rule, but the other elements of Rule 10b-5 may be important to deciding whether certain types of social media advertising comply with securities laws.  We'll discuss these types of issues below when we consider state enforcement actions. 
Telling the Whole Truth

The primary thing to remember about Federal and state securities laws are a few very simple principles about fraud are at the core of hundreds of securities rules:

  • Principle 1 - Fraud is bad.
  • Principle 2 – Principle 1 never changes. 
So, what is fraud?

  • Principle 3 - Tell the truth.
  • Principle 4 – Tell the whole truth. 
Most people get the "tell the truth" part right.  That's because most securities violations aren't made by people who are trying to commit fraud.  So, most people don't lie.  But not lying is the easy part.  Telling the "whole truth" is where people most often make mistakes.  It's easy to leave important stuff out.

What shouldn't you leave out?

You have to tell investors all material facts.

What's a material fact?

Like beauty, material facts are in the eye of the beholder.  The beholder is your investor.  A material fact is anything that would likely influence a reasonable investor's decision to either invest or not invest in your business.

What happens if you tell investors all the material facts, but they don't understand them?

You have an obligation to give investors the tools to understand the material facts you tell them by also telling them all the material facts that are necessary to avoid misleading investors.

What does that mean?

Think of it this way.  Suppose you go to the library this afternoon, but after you leave the library you hang out with your friends in a bar the rest of the afternoon.  What if your significant other asks you:   "Where did you go this afternoon?"  It would be telling the truth, if you say:  "I went to the library."

But that's not the whole truth.

Now what if you said:  "I went to the library and then I went downtown."  That would be adding a little more of the whole truth.  If your spouse wanted to know how far you drove that afternoon to determine how much gas is left in your car, it might even qualify as the whole truth.  But if your spouse wanted to know what you were doing that day, she would probably think that going to the bar to hang out with your friends is an important fact.

 Section 10(b) of the Securities and Exchange Act and SEC Rule 10b-5 prohibit misrepresentations or omissions of material fact in connection with the purchase or sale of any security.  They don't specifically mention our little story about your journey to the library and to the bar, but that's what they mean. 

Investors are entitled to evaluate the total mix of information, not just bits of information in isolation.  If there is a substantial likelihood that a reasonable investor would think any piece of information significantly alters the “total mix” of information available, that piece of information is a material fact.  If you don't tell it to the investor, you have committed securities fraud.

This little story gives you a map to avoid getting lost in the swamp of securities fraud.  But this story doesn't tell you how you actually raise capital.  How do you actually sell securities?

Telling Compelling Stories is the Key to Sales

My story about the library and the bar also illustrate another point that is critically important to selling anything.

To sell anything, you have to tell a story that people will care about:
  • What good is advertising, if no one will pay attention to it?
  • What good is advertising, if people tune out after seven seconds?
  • What good is advertising, if people say "So what!" after they listen to it?
People will only pay attention to your advertising, if you tell a compelling story.
That's because you have lots of competition for their attention.
Humans have thousands of years of experience telling stories and listening to the stories other people tell.  People try to get us to pay attention to hundreds of stories each day.  To survive in the story-rich environment we all live in, we have become experts at screening out stories that don't interest us. 
Most people operate on the seven seconds or out rule.  Either you catch their interest in the first seven seconds or they move on to something else.
That's true whether the media is print, audio or video, paper, analogue or digital.  The first words or images or the first seven seconds are your doorway to:
·         Raising the capital you need to grow your business.
·         The trash bin of history. 
If you fail in your mission to capture people's attention during that first seven seconds, you are wasting your advertising dollars.  More importantly, you are wasting opportunities.  Every accredited investor who sees your advertisement and then tunes out is a lost opportunity.  Lost opportunities destroy businesses.
This creates a challenge, if you use advertising to sell securities.
Advertising Materials and Social Media
Let's think about fraud in light of the type of advertising that businesses of different sizes are likely to conduct. 
The Internet and social media will become the battleground most small businesses use to win the hearts and minds of investors.  We can expect that many of the new Rule 506 (c) advertisements won't look and feel like the advertisements large public companies have traditionally done for their public securities offerings. 
The social media environment is too unorganized and chaotic to just download old securities advertisements into social media.  Cold advertisements won't be noticed.
Because most traditional securities advertisements are BORING.  They don't pass the seven seconds test.
Advertising has changed a lot faster than securities laws during the past several decades.  We should expect businesses will try to sell securities by using every Internet and social media tool people use to sell other products and services (like travel, music and porn).
Although the media and tools will be new, both state and Federal securities laws will apply the normal fraud tests to the content of advertising materials.
What do think will happen when social media sales techniques collide with traditional anti-fraud provisions of securities laws?
What will social media securities sales campaigns look like?
It's impossible to predict every attributes of future sales campaigns, but it's useful to remember a fundamental characteristic of social media is that it's an ongoing and free flowing conversation.  Unlike traditional advertising, it's not a one way street.  Users create part of the conversation.  This principle will account for many of the differences between how you use social media to sell securities vs. how you use traditional advertising.
  • How much information can you include in your Tweets?  Your advertising can't include all the material information about your business. 
  • Creating an integrated disclosure campaign that follows up short advertisements with full disclosure to the people your advertisements solicit will be a critical part of your compliance strategy. 
  • Sales and follow-up materials don't have to duplicate one another, but effective selling usually requires each message to reinforce earlier communications.  But it's critically important for securities compliance purposes that one message doesn't contradict what you say in another message.  When you piece it all together, it has to both tell the whole truth and be internally consistent.  That means isolated efforts to sell your deal can get you into trouble.  You should plan all your sales and disclosure messages as a single integrated campaign where each part is designed to fit with all the other pieces.
  • Videos and other social media tools by nature generally appeal to emotion.  In theory, you can compensate for that by later delivering a more rational document.  But in a law suit, plaintiffs' lawyers will use your videos and other sales tools against you to convince juries you used trickery to commit fraud.  So, each of your sales materials needs to pass a smell test.  When considered by itself an advertisement shouldn't smell like fraud and trickery.  That can create trouble for you even if you later communicate the whole truth.
Virtually any of the tricks you commonly see in advertising to sell products that causes people to make emotional purchase decisions is frowned upon in the world of securities regulators.  Let's look at advertising in the auto industry to put these guidelines into perspective:
  • Modern auto sales are based on convincing you that you will die alone without the companionship of members of the opposite sex if you don't buy this sexy car.  Another approach is that you're a bad parent if you don't buy a kid friendly car.  Green cars appeal to your sense of being a good steward for the planet.  All these are emotional pitches based on short stories in which the product being sold is only playing a cameo role .  In extreme examples, you sometimes see a commercial and wonder what product it was trying to sell.
  • At the other extreme, Henry Ford sold a basic Model T car 100 years ago.  The sales pitch was simple: it's cheap, it's easy to fix and it will get you where you want to go better than a horse.
Guess which type of advertising securities regulators want you to use.
But we have already discussed that the art of selling requires you to  tell a story that creates an emotional connection.  So, the art of selling securities requires you to mix your material facts into a compelling story. 
Examples of Current Advertising Rules
Advertising securities wasn't invented yesterday.  It's a regular practice in registered public offerings.  So, it's not surprising that the SEC and state securities regulators have already issued rules to regulate advertising in public offerings.
Let's look at some of these rules to get a feel for current advertising dos and don'ts we can apply to advertising in private placements.
SEC Rules for Advertising Content
A fundamental principle of Federal securities law advertising rules is that you are supposed to sell securities with the information you include in your Prospectus that is part of the registration statement you file with the SEC in your registered public offering.  You have special liability for both the things you say in a Prospectus and the things you should have said in the Prospectus but didn't say.
The SEC doesn't want you to use information that isn't in your registration statement's Prospectus to sell securities and thereby avoid the protections investors are supposed to receive in registered public offerings. 
That's why SEC rules about advertising in public offerings try to cause you to drive people to read the Prospectus that is part of the registration statement you file with the SEC.  SEC rules about the content of advertising focus on identifying who is selling the securities, the type of securities being sold, how much money you are trying to raise and where people can find out more information.  SEC Rule 133 defines what an offer is and Rules 134, 134a, 134b, 135, 135a, 135b, 135c, 135e and 164 generally describe permitted advertising content and other permitted notices outside a Prospectus.  SEC Rules 137, 138, 139 and 139a define when a broker's report about a business that is selling securities is not part of the effort to offer and sell securities.
These rules should serve as your starting point for determining what you can safely say in advertising your private placement under Rule 506 (c).  But in your private placement, you have no Prospectus.  There are no special liability rules for what you say or don't say in your private placement memorandum vs. what you say or don't say in your advertising.  What you say in different documents you use in a private placement is all judged by the same rules.  That's one reason why private placement advertising will probably feature substantially different content than advertising materials used in registered public offerings.
Separate Your Commercial Product Sales Messages from Your Investment Messages
Try to carefully separate the commercial advertising and promotions you use to sell products to customers from your advertising to sell securities.  Your sales and marketing team may routinely make aggressive performance claims to sell your products and services.
Puffing is an expected part of commercial sales.  That's because we generally have a philosophy of "Let the buyer beware."  Consumers are supposed to be skeptical and protect themselves by not believing everything a seller says about its products.
But the reverse is true when you sell securities.  The primary basis of securities laws is "Let the seller beware."  Sellers have an obligation to tell the whole truth.  Investors are entitled to believe every word you say when you sell securities.  So, exaggerating how well your products perform or saying that no competitor's product can do what your product does can constitute securities fraud. 
If you use the Internet and social media indiscriminately to generate both product sales and securities sales, it will be difficult to convince anyone that your commercial puffery isn't securities fraud.  Try to make clear distinctions between the two.  You should particularly avoid the following practices that signal to the SEC that you are using your product advertising to sell securities:
  • Changing your commercial sales messages to more aggressively tout your product compared to competitors immediately before or during the time you conduct your securities offering. 
  • Increasing your advertising budget substantially when you are selling securities.
  • Placing your product ads in media where investors are more likely to see it than are customers.
All of these practices are warning signs that the SEC might use to determine that your product advertisements were part of your efforts to sell securities.
Large public companies have dealt with similar issues for many years.  Small businesses with smaller budgets and less experience will have much greater difficulty navigating this minefield to find safe pathways for selling products and for selling securities.  The fewer times these paths cross one another the less securities fraud risk you run.
When you establish a budget for advertising and general solicitation, you will probably pay more to decide what you say and how you say it than what you will pay different media outlets per view or per click.
Temptations to push the envelope on your advertising will be everywhere.  You will begin to see really "cool" stuff other business are using to sell securities through social media in the near future.  The lawsuits that decide the differences between what is "cool" and what is fraudulent probably won't happen for at least several years.  It will probably take that long for most businesses that raise capital to crash and burn.
So, don't assume that the advertising practices you see other businesses are doing comply with securities laws.
Liability for What Other People Say
Another relevant Federal securities fraud principle that is that you can be liable for fraud based on what other people say about your business.
Let's talk about several examples.
Analysts and Experts. 
If you give investors positive statements that other people have said about you or your products, you can be deemed to have "adopted" these statements that other people have made.  This can happen when you quote "experts" or if you tell investors about overly optimistic securities analyst reports about your business or industry.  There is a body of law that determines when you are responsible for what analysts say about you and when you are not.
Blogger and Customer Product Reviews
When businesses use social media to sell products or services, they often use statements made by third parties as a major part of their sales effort.  They plant phony customer reviews on websites or they reward bloggers for giving positive reviews.  Be aware that the SEC would frown on selling securities using many of these practices that businesses often use to sell products and services.  For example, if you plant or pay for third party statements, it may be misleading if you don't also disclose your role in causing these statements to be made.
Social Media "Conversation"
So far, we have just considered the obvious – that if you plant false endorsements it might be fraud.  You can control this to some extent.  But the social media conversation often isn't limited to communications between two people.  Multiple people jump in.  If you encourage multiple people to share their views about your business to the world, you could have liability for what they say about you, if you know they are saying something that is false or misleading.  Consider ways you can reduce that risk.  General disclaimers about not being responsible for the views expressed by others may be helpful, but they might not be sufficient to fully protect you.  Correcting false or misleading statements others make may protect you from liability for that particular statement, but it might also create the impression that unless you correct a statement its true.  You could create a duty to correct everything if you publicly correct some statements.
Under some circumstances you can have liability for statements made in materials to which your materials refer or link.  In a highly linked world, think about what you are linking to in all your communications.  Do you really want to take responsibility for everything you link to?
State Securities Laws Regulate Advertising Content
State securities laws overlap SEC rules.  But it's useful to understand that many states concentrate their enforcement efforts on things the SEC doesn't spend as much time doing.  The SEC devotes so much of its resources to policing large public companies, public trading markets and the investment banking and mutual funds industries.  That leaves a lot of potential "bad guys," who use high pressure fraudulent schemes that focus on separating small and medium size investors from their money. 
State securities regulators often focus their resources on common fraudulent schemes that often use the same tried and true misleading and high pressure sales techniques.  These schemes often involve real estate, oil drilling, commodities, viatical contracts and other alternative investments.
You might be a perfectly legitimate business, but if your advertising makes you look and sound like one of the bad guys, state securities regulators will probably single you out of the crowd for special investigation.
We don't have room to summarize the rules of 50 states here.  So, I'll summarize the fraud and advertising rules in my home state.  Here's what North Carolina rules say are deceptive or misleading practices:
·         Misleading Comparisons.  Comparison charts or graphs showing a distorted, unfair or unrealistic relationship between the issuer's past performance, progress or success and that of another company, business, industry or investment media. So, saying that you have more revenue than Google did at a similar stage might be a fraudulent advertisement even if its true.

·         Unequal Presentation of Adverse and Favorable Disclosures.  Lay-out, format, size, kind and color of type used so as to attract attention to favorable or incomplete portions of the advertising matter, or to minimize less favorable, modified or modifying portions necessary to make the entire advertisement a fair and truthful representation.  You can't shout the good news in headlines and bury the bad news in small type in the back.

·         Disguising Opinions as Facts.  Statements or representations which predict future profit, success, appreciation, performance or otherwise relate to the merit or potential of the securities unless such statements or representations clearly indicate that they represent solely the opinion of the publisher thereof.  To avoid problems clearly identify opinions and "forward looking statements."  Evaluate whether you have a rational basis for including these options and projections.  Tell investors where they can find explanations of why your business' actual performance might be different from these opinions and projections. 

·         Generalizations Not Supported by Facts.  Generalizations, generalized conclusions, opinions, representations and general statements based upon a particular set of facts and circumstances, unless those facts and circumstances are stated and modified or explained by such additional facts or circumstances as are necessary to make the entire advertisement a full, fair, and truthful representation.  This is another way of saying that you should state the assumptions on which your predictions are based.  Give investors the tools to evaluate whether your assumptions are reasonable and what will happen if they are not.

·         Overstating Potential Gains.  Sales kits or film clips, displays or exposures, which, alone or by sequence and progressive compilation, tend to present an accumulative or composite picture or impression of certain, or exaggerated potential, profit, safety, return or assured or extraordinary investment opportunity or similar benefit to the prospective purchaser.  Repeat after Me:  "Nothing in life is guaranteed."  Avoid saying things like guaranteed income or minimum returns on investment.  $0 is always the minimum return you can guaranty.  Don't refer to past periods of high profits to predict future high profits.

·         Excessive Optimism.  Distribution of any non-factual or inaccurate data or material by words, pictures, charts, graphs, or otherwise, based on conjectural, unfounded, extravagant, or flamboyant claims, assertions, predictions or excessive optimism.  The effects of graphic images are difficult to overcome with written disclaimers.  If you distribute graphs showing ever increasing profits, securities administrators will be skeptical that footnotes urging caution are effective disclosures.

·         Bonus Incentives.  Any package or bonus deal, prize, gift, gimmick or similar inducement, combined with or dependent upon the sale of some other product, contract or service, unless such unit or combination has been fully disclosed and specifically described and identified in the application as the security being offered.  Don't promise a free puppy to people who buy your stock.  Likewise, securities regulators will be skeptical about promising discounts to the first hundred buyers.

Stop Supplying Outdated Information
Businesses often start offerings with one set of projections and reality forces them to change their projections.  In other cases, your personnel change or you drop planned features from your product or you change product pricing or you change your target market segment.
Changes aren't evidence of fraud.  Change is a fact of life in business.  Just make sure you update your disclosures to reflect these changes.  But if you continually have to update projections to reflect changes, you should consider whether the changes are a warning sign that you haven't investing enough effort to vet your projections.
·         If you have an investment solicitation on your website, either update your message or take it down.
·         If you advertise on other websites, either update or cancel your advertising contract.
·         You may need to call specific attention to changes you have made from earlier disclosures instead of hoping investors won't notice the downgrade differences.

That still sounds simple.  All you have to do is to undo what you were doing.

But social media often takes on a life of its own.  That's one reason people like it.  It's cheap, because once you initiate something, it can keep moving through social media without you doing anything to keep it going.  If your advertising goes viral, it's a very cheap way to advertise.  But the low cost often doesn't include a turn off switch or button.  Sometimes you can't turn it off.

So, how does an offer embedded in a viral video affect your ability to turn off your offering?

Will anyone believe you didn't plan to use it to continue to make offers while pretending not to?

Soliciting Offers to Buy

Playing lawyer is dangerous.  Some people know just enough law to get themselves into trouble.  They may have heard that unless you specify a price you haven't made a legal contract offer that someone can accept.

Don't mix up contract law with securities laws.  The SEC considers soliciting someone to make an offer to buy your securities to be the same as you offering to sell securities.  So, your advertising can be an offer to sell even if it doesn't specify the price or other material terms.

Beware of Multiple State Securities Laws
Rule 506 exempts you from pre-clearance filings and the registration requirements of state laws, but state anti-fraud laws still apply to your offering.  Your advertising may violate state securities laws even if your advertising complies with Federal laws. 

But which state laws apply to your offering?  The Internet and other advertising media are available in all 50 states.  How do you check fifty state laws before you advertise?  That could be expensive and time consuming.
Be specific in your advertising materials about where you are offering and residents of which states can purchase securities in your offering.  For example: "This offer is valid only for investors who live in the following states _____.  Residents of other states may not participate in this offering."
But, of course, these disclaimers won't help you, if you ignore them and sell to whoever contacts you.  Do you have the discipline to turn down investments from states you initially excluded?
Can you change your mind about where you are offering and take steps to comply with state laws after people from excluded states contact you? 
If you expand your offering after investors in other states contact you and you are using SEC Rule 506 that preempts many state laws, your sales may be legal.  But if you are not using Rule 506, you may have violated the pre-sale notice and advertising rules of states you add to your offering.
Record Keeping
Keep a record of all your advertising.
The burden will be on you to prove that your advertising didn't violate the rules.  That's why it's important to keep a record of all your advertising.  It's important to be able to document:
  • What you said.
  • How you said it.
  • Who saw it.
  • When you started saying it.
  • When you stopped saying it.
  • Whether you have ever said anything contrary.
  • If your advertising is too short to avoid omitting material facts, how you later delivered the material facts and who you delivered it to.
How long should you retain records?
Check applicable statutes of limitation for how long the SEC or Department of Justice can bring actions against you and how long investors can seek damages or state securities regulators can assert you should have complied with state securities laws, because you failed in your attempt to qualify for the 506(c) exemption. 
Penalties for Non-Compliance
If you don't comply with Federal or state securities laws, the usual remedy is rescission.  That means that investors have the right to get their money back, plus interest.  If the business cannot pay the money back, officers and directors, investment bankers and others might have personal liability. 
If you use advertising that convinces securities regulators you intended to commit fraud, you might face criminal prosecution.
Articles in Private Placement Series
In July 2013 the SEC made the biggest changes to private placement capital raising rules since the SEC issued Regulation D more than three decades ago.
More than 90% of private securities offerings are affected by these changes.
The SEC's recent changes are a mixed blessing for businesses selling securities.  These changes include:
  • Prohibiting using Rule 506 if someone affiliated with your business or with your capital raising efforts has violated securities or other financial industry laws. 
  • Adding new Rule 506 (c), which allows you to advertise when you raise capital in a private placement.
  • Rule 506 (c) also requires you to take reasonable steps to independently verify that all people who buy securities are "accredited investors," if you advertise your offering.
Our articles in this series about SEC Rule 506 private placements help you decide how you can use these new rules to raise the capital your business needs by balancing three competing factors:
  • Advertising effectiveness
  • Budget
  • Securities law compliance 
You have to get all three right to successfully raise capital.
Here's a list of our articles that discuss the primary issues you will face when you try to balance these three objectives in your capital raising efforts:
  • Advertising Messages   Tweeting Your Way to Securities Fraud in 140 Characters: What Do you Say in SEC Rule 506 (c) Advertising in Private Placements?  How do you decide what you say in your advertising?  How do you say it?  What current SEC and state advertising rules can you use to guide your advertising decisions?  Can you combine effective sales messages with complying with securities laws?  Or is it an either or choice?  What's the point of advertising if securities laws prevent you from selling effectively?
  • Choosing the Right Media for your Advertising. Don't Tweet when You Should Have LinkedIn: Choosing Your Advertising Media in SEC Rule 506 (c) Private Placements  How do you advertise within your budget?  How do you identify your "sweet spot" target investors and the right media to reach them?  What social media tools can you use?  How do you attract accredited investors who meet SEC criteria for making investments?
  • Building your Sales and Legal Team.  Would You Let Your Lawyer Run Your Sales Department?  How Can You Build the Right Team for Advertising in SEC Rule 506 (c) Private Placements?  How do you build teams to help you do effective advertising while still complying with SEC and state anti-fraud rules?  What role should your sales team play?  What role should your lawyer play?  How do you choose a lawyer who can help you create effective advertising that also complies with securities laws.
  • Accredited Investor Verification.  Will SEC Rule 506 (c)'s Permission to Advertise Cure Your Capital Woes or is Its Accredited Investor Verification Requirement a Poison Pill?  If you want to advertise your securities offering, you must take reasonable steps to verify that everyone you sell to is an "accredited investor."  You can't just rely on the investor checking a box that tells you it is accredited.  How much checking is "reasonable"?  How do you qualify for the "safe harbor" the SEC included in Rule 506 (c)?  What happens if you don't obtain the right type of proof that the people you sell securities to are "accredited investors?"  Why will some investors refuse to comply with your verification requests?  What can you do to reassure investors about privacy issues and make the verification process more convenient for investors?
  • Beware of SEC Integration Rules:  SEC RULE 506 (c) Integration Pitfalls: Don't Use the SEC's New Advertising and Solicitation Private Placement Rule to Saw Off the Limb You are Sitting On  Why should you look before you leap into advertising?  What integration and related pitfalls does Rule 506 (c) create for businesses that choose to advertise or engage in general solicitations?  How do you sell securities to people who are not accredited investors under another SEC private placement exemption, if your advertising doesn't attract enough accredited investors to finance your business?
·         Getting Caught : How Will the SEC Know I'm Advertising in a Rule 506 (c) Private Placement?   How will the SEC know about your advertising?  Why isn't it a defense that everyone else is breaking the rules?  How do you deal with the interim period when people are figuring out what the new rules let you do and don't let you do?
·         Bad Actors:  SEC's Bad Actor Rule: When You Lie Down with Dogs Expect to Get Fleas  To use Rule 506 (with or without advertising) you have to verify that a long list of people who are affiliated with your business or with selling your securities offering haven't violated securities or other financial industry laws.  How do you make sure the SEC's Bad Actor Prohibition for Rule 506 private placements from cut off your ability to raise capital? 
If you would like to learn more about learning how to grow your business or other issues important to your success, you can reach me at or Or you can check out my eLearning course at or or you can purchase my books at



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