Okay, I am a bit confused. Right now, most startups are probably advised to make a good-faith effort to ascertain that their investors are indeed accredited. If they engage in general solicitations, then the bar is higher for ascertaining this. Correct?
If I wanted to message all my users and tell them to point their investor friends towards our AngelList profile, wouldn't that be public solicitation?
> Okay, I am a bit confused. Right now, most startups are probably advised to make a good-faith effort to ascertain that their investors are indeed accredited.
There's no requirement that I see for "seed capital" (Rule 504) investors to be accredited. Offerings that make use of the Rule 505 or Rule 506 exemptions instead, however, are limited to 35 non-accredited investors (the language of the exemption requirement, in both cases, "There are no more than or the issuer reasonably believes that there are no more than 35 purchasers of securities from the issuer in any offering under this section"; in both cases, accredited investors, and certain other special classes, are excluded from the count of purchasers.)
> If they engage in general solicitations, then the bar is higher for ascertaining this.
Well, we don't know precisely because the rule required under the JOBS Act permitting general solicitation under the Rule 506 exemption haven't been written, but it would seem likely to be so once that is permitted. But the Act itself provides that the elimination of the general solicitation prohibition requires that "all purchasers of the securities are accredited investors", and that the "rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission." This would appear to require a higher bar than the simple "reasonable belief" test in the current exemptions.
> If I wanted to message all my users and tell them to point their investor friends towards our AngelList profile, wouldn't that be public solicitation?
I suspect so (but I'm not an expert in the application of these regulations): you aren't soliciting investment directly from just the identified users, you are asking them to solicit on your behalf from a vaguely defined group ("investor friends".)
I would suspect that an offering made only to your existing users would not be general solicitation.
If I wanted to message all my users and tell them to point their investor friends towards our AngelList profile, wouldn't that be public solicitation?