Offering Integration Rules
Integration is the SEC concept that two or more separate offerings may be treated as a single offering if they are really parts of one plan, which can destroy an exemption that works for each on its own. Rule 152 gives a framework and safe harbors. The main safe harbor is a 30-day gap between offerings, with extra conditions when one involves general solicitation. Sponsors running a series of deals need to plan how each is separated.
Why it matters
Each exemption has conditions, such as no general solicitation in a 506(b) offering or a dollar cap in Rule 504. If a second offering with advertising is combined with a first one that required none, the first may lose its exemption. A sponsor who raises money for several properties under the same brand can accidentally integrate offerings.
The Rule 152 framework
- General principle. The issuer must have a reasonable belief, based on the facts, that each offering complies with an exemption on its own terms.
- Two exempt offerings without general solicitation. The issuer must have a reasonable belief that purchasers were not solicited through general solicitation or had a pre-existing substantive relationship.
- Offering with general solicitation. Another exempt offering that allows general solicitation must meet its own conditions, and investors in a non-advertising offering must not have been solicited through the advertising.
The safe harbors
| Safe harbor | What it says |
|---|---|
| 30-day separation | Offerings separated by at least 30 calendar days are not integrated, with conditions if the earlier or later offering allowed general solicitation |
| Registered offerings and Rule 701, Regulation S and similar offerings | Specified offerings are not integrated with others |
| Offerings terminated or completed | Not integrated with a later offering that meets the conditions |
Practical steps for sponsors
- Keep a calendar of each offering's start, first sale and close.
- Use separate entities and separate offering documents for each deal.
- Avoid advertising a specific deal while another unadvertised deal is open to the same investors.
- Document why each investor was approached and how, especially for 506(b) deals.
Related issues
Integration risk is highest when a sponsor runs a 506(b) deal and a 506(c) deal at the same time, or markets a brand publicly while raising privately. See what general solicitation is and 506(b) vs 506(c).
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Book Free ConsultationFrequently asked questions
Can I run two syndications at the same time?
Yes, if each has a distinct plan and meets its own exemption, with care about solicitation and investor overlap.
Does a 30-day gap solve integration?
It is a safe harbor with conditions. Without general solicitation in either offering the analysis is simpler.
Does integration affect Form D?
A combined offering may need to be reported on one Form D, and integrated offerings can lose their exemption.
How do funds avoid integration?
By treating each fund as a separate offering with its own documents, and monitoring solicitation across them.