Start-ups and other companies can now use general solicitations to fund private placements — for the first time in 80 years. The new Rule 506 may prove to be the answer to the prayers of some start-ups frustrated with existing fund sourcing platforms. Observe:

The amount that can be raised is unlimited

There is no requirement for review of the offering under any Blue Sky laws (state securities regulations)

There is no review of the offering by the SEC

Solicitations can be online or offline

Solicitations can be made to anyoneSales (as opposed to solicitations, which can be made to the world) must still be to accredited investors, and issuers must get a third-party to verify that each investor is in fact accredited.Companies will continue to need to use professional private placement memorandum and related offering documents. They also will have to rely on appropriate non-disclosure agreements to keep details of their business plans confidential.

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