General Solicitation: What Is Allowed in a Private Offering
General solicitation means offering securities through public channels, such as ads, open social media posts, mass emails, a public website describing the deal or an open seminar. It is prohibited under Rule 506(b) and 504 without extra steps and allowed under Rule 506(c) if every investor is verified accredited. The line is crossed when the communication reaches people with whom you have no pre-existing substantive relationship.
What counts
- Newspaper, radio, television and online advertisements
- Public social media posts describing a specific offering and how to invest
- A website open to the public that describes the terms or invites investment
- Mass emails or texts to people you do not know
- Seminars or webinars open to the public where the offering is discussed
- Podcast or interview remarks that promote a specific deal
What generally is not a solicitation
- Offers to people with whom you have a pre-existing substantive relationship, meaning you know enough about their finances and sophistication to judge their suitability.
- Factual business information about your company that is not an offer, such as announcing a completed acquisition.
- Communications through a password-protected portal after a qualifying relationship is created.
- Rule 148 demo days, which allow certain pitch events sponsored by qualifying organizations.
The pre-existing relationship test
Courts and the SEC look at whether the relationship existed before the offering began and whether it is substantive. A person you met at a conference yesterday probably does not qualify. A person who has invested with you before and whose financial position you know probably does. Some sponsors use a questionnaire or an independent third party that has the relationship, and keep records of how relationships began.
Social media
| Post | Risk under 506(b) |
|---|---|
| Photos of a finished property with no offer | Lower, but context matters |
| Post naming a deal, a target return and a link to invest | High. This is likely an offer to the public. |
| Direct message to a friend who has invested before | Depends on the relationship |
The conservative approach is to keep offering details out of public channels unless you are using 506(c).
If you cross the line
A 506(b) offering that includes general solicitation loses the exemption, which can give investors a right to rescind and invite regulatory action. Sponsors sometimes cure by switching to 506(c) and verifying every investor, which only works if all investors are accredited. See 506(b) vs 506(c) and verification under 506(c).
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Book Free ConsultationFrequently asked questions
Can I post about my company on LinkedIn?
Yes, if you do not offer the securities. Factual company news is different from an offer. Do not link to an offering or give investment terms in a 506(b) deal.
Does a webinar count?
If it is open to the public and discusses the offering, it can be general solicitation.
Can a broker-dealer introduce investors?
A registered broker-dealer with pre-existing relationships may help, subject to the rules. Finders without registration are risky.
What is a demo day?
A pitch event run by a college, angel group or similar organization. Rule 148 allows limited communications at them without general solicitation.