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Electronic Code of Federal Regulations
Amendment from July 24, 2013
17 CFR--PART 230View Printed Federal Register page 78 FR 44804 in PDF format.
Amendment(s) published July 24, 2013, in 78 FR 44804
Effective Dates: September 23, 2013
6. Amend §230.506 by:
a. In paragraph (a), adding the phrase “or (c)” after the phrase “satisfy the conditions in paragraph (b)”;
b. In paragraph (a), removing the phrase “section 4(2)” and adding in its place “section 4(a)(2)”;
c. In the heading of paragraph (b), adding the phrase “in offerings subject to limitation on manner of offering” after the phrase “Conditions to be met”;
d. In the note following paragraph (b)(2)(i), removing the phrase “this section” and adding in its place “paragraph (b) of this section”; and
e. Adding paragraph (c) to read as follows:
§230.506 Exemption for limited offers and sales without regard to dollar amount of offering.
* * * * *
(c) Conditions to be met in offerings not subject to limitation on manner of offering—(1) General conditions. To qualify for exemption under this section, sales must satisfy all the terms and conditions of §§230.501 and 230.502(a) and (d).
(2) Specific conditions—(i) Nature of purchasers. All purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors.
(ii) Verification of accredited investor status. The issuer shall take reasonable steps to verify that purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors. The issuer shall be deemed to take reasonable steps to verify if the issuer uses, at its option, one of the following non-exclusive and non-mandatory methods of verifying that a natural person who purchases securities in such offering is an accredited investor; provided, however, that the issuer does not have knowledge that such person is not an accredited investor:
(A) In regard to whether the purchaser is an accredited investor on the basis of income, reviewing any Internal Revenue Service form that reports the purchaser's income for the two most recent years (including, but not limited to, Form W-2, Form 1099, Schedule K-1 to Form 1065, and Form 1040) and obtaining a written representation from the purchaser that he or she has a reasonable expectation of reaching the income level necessary to qualify as an accredited investor during the current year;
(B) In regard to whether the purchaser is an accredited investor on the basis of net worth, reviewing one or more of the following types of documentation dated within the prior three months and obtaining a written representation from the purchaser that all liabilities necessary to make a determination of net worth have been disclosed:
(1) With respect to assets: Bank statements, brokerage statements and other statements of securities holdings, certificates of deposit, tax assessments, and appraisal reports issued by independent third parties; and
(2) With respect to liabilities: A consumer report from at least one of the nationwide consumer reporting agencies; or
(C) Obtaining a written confirmation from one of the following persons or entities that such person or entity has taken reasonable steps to verify that the purchaser is an accredited investor within the prior three months and has determined that such purchaser is an accredited investor:
(1) A registered broker-dealer;
(2) An investment adviser registered with the Securities and Exchange Commission;
(3) A licensed attorney who is in good standing under the laws of the jurisdictions in which he or she is admitted to practice law; or
(4) A certified public accountant who is duly registered and in good standing under the laws of the place of his or her residence or principal office.
(D) In regard to any person who purchased securities in an issuer's Rule 506(b) offering as an accredited investor prior to September 23, 2013 and continues to hold such securities, for the same issuer's Rule 506(c) offering, obtaining a certification by such person at the time of sale that he or she qualifies as an accredited investor.
Instructions to paragraph (c)(2)(ii)(A) through (D) of this section:
1. The issuer is not required to use any of these methods in verifying the accredited investor status of natural persons who are purchasers. These methods are examples of the types of non-exclusive and non-mandatory methods that satisfy the verification requirement in §230.506(c)(2)(ii).
2. In the case of a person who qualifies as an accredited investor based on joint income with that person's spouse, the issuer would be deemed to satisfy the verification requirement in §230.506(c)(2)(ii)(A) by reviewing copies of Internal Revenue Service forms that report income for the two most recent years in regard to, and obtaining written representations from, both the person and the spouse.
3. In the case of a person who qualifies as an accredited investor based on joint net worth with that person's spouse, the issuer would be deemed to satisfy the verification requirement in §230.506(c)(2)(ii)(B) by reviewing such documentation in regard to, and obtaining written representations from, both the person and the spouse.