ExpertHard1 markMultiple Choice
CPA · Question 22 · Area 2: Business Law
Under Regulation D, Rule 506 of the Securities Act of 1933, which of the following statements is correct regarding the exemption from registration?
Under Regulation D, Rule 506 of the Securities Act of 1933, which of the following statements is correct regarding the exemption from registration?
Answer options:
A.
The offering amount is limited to million.
B.
The issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors.
C.
The issuer must file a full registration statement with the SEC.
D.
Sales to non-accredited investors are strictly prohibited.
How to approach this question
Know Reg D Rules: Rule 504 (Small, $10M), Rule 506 (Unlimited $, Sophisticated investors). 506 = Unlimited Accredited + 35 Sophisticated Non-Accredited.
Full Answer
B.The issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors.✓ Correct
Rule 506 allows an issuer to raise an unlimited amount of capital from an unlimited number of accredited investors and up to 35 non-accredited investors who must be 'sophisticated' (have financial knowledge).
Common mistakes
Confusing Rule 504 and 506 limits.
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