TME 13 | Reg D 506(b) 506(c): Which One Will Make You More Money?

Title: Reg D 506(b) vs 506(c) – Which One Makes You More Money? 

Summary:

In this informative video, securities attorney and real estate investor Seth Bradley discusses the key differences between Regulation D’s 506(b) and 506© exemptions and their implications for capital raising in real estate. He emphasizes the importance of understanding these distinctions to maximize fundraising opportunities while remaining compliant with SEC regulations. Bradley explains that both exemptions allow for raising funds without registering as public securities but come with different rules regarding investor eligibility and solicitation. The 506(b) exemption relies on pre-existing relationships and allows for non-accredited investors, but does not permit advertising or solicitation. In contrast, 506© offers full advertising capabilities but limits participation to accredited investors only. Bradley concludes by stressing that selecting the incorrect exemption can lead to potential legal issues and missed financial opportunities, encouraging viewers to carefully analyze their business model before choosing an exemption.

Links to Watch and Subscribe:

https://www.youtube.com/watch?v=EnGLVOCBfqE&list=PLSfheWyV7beFqERLX4ebBUJ4SmzmF6z8e&index=1

Bullet Point Highlights:

• Regulation D Overview: Both 506(b) and 506© are part of the SEC’s Regulation D, allowing capital raising without public registration.
• 506(b) Details: This exemption permits up to 35 non-accredited investors, but prohibits advertising and requires pre-existing relationships.
• Advertising Freedom with 506©: Enables widespread advertising and solicitation, but limits participants to accredited investors only.
• Investor Credibility: Verification of accredited investor status is mandatory in 506© to ensure compliance with SEC regulations.
• Financial Implications: Understanding each exemption is crucial for maximizing fundraising and minimizing legal risks.
• Legal Compliance: Choosing the wrong exemption can result in SEC violations and significantly limit fundraising capabilities.
• Strategic Decision-Making: Investors should align their exemption choice with their business model to ensure optimal capital raising.

Transcript:

(Seth Bradley)

regggd 506b versus 506 C. Which one makes you more money? You're about to raise capital for your next real estate deal and someone tells you just file under regggd 506b or 506. But hold up, is that actually the best way to maximize your raise or are you leaving money on the table? Today, I'm breaking down the real difference between 506b and 506 C. And more importantly, which one will put the most money in your pocket as a capital raiser, while I'm keeping you, of course, out of trouble with the SEC. Real quick, if you don't

 

know me, I'm Seth Bradley, securities attorney, real estate investor, capital raiser. I'm here to show you how to scale your business while staying compliant and out of the SEC's purview. Let's get it. All right. First, the basics of regggd. what you need to know. All right, let's keep this simple. Both 506b and 506 C fall under what's called regulation D, which is an SEC exemption that allows you to raise money for private investors without registering it as a public security. This is why syndicators, fund managers, capital

 

raisers, we all love it. It's faster, it's cheaper, and doesn't require SEC approval before you start raising capital. But here's where most people get confused. These two exemptions are not the same, and picking the wrong one can limit your ability to raise capital or even get you into legal trouble. So, let's figure this thing out together. Next, let's go through 506b first. It's the old school relationshipbased method. So, 506b, it's the old school country club method of raising capital. It allows you to bring in up to 35

 

nonacredited investors. That's significant. But here's the catch. You cannot advertise. you cannot solicit. So that means no Facebook ads, Instagram posts, no blasting your deal to strangers, no talking at a networking event about your deal. The SEC says you must have a pre-existing substantive relationship with your investors before they invest. So what does that mean? Well, if you just met a person at a networking event last week and now you're pitching him your deal, you could already be violating securities laws.

 

The SEC has cracked down on this and if they think you're using 506b as an excuse to backdoor advertise, they will come knocking. That said, 506b has its place. If you have a st