How The Rule 506(c) Income Safe Harbor Got Expanded

Law360, New York (August 20, 2014, 10:28 AM EDT) -- Rule 506(c) allows issuers to market private placements through general solicitations. They must, however, take "reasonable steps" to make certain that they sell only to accredited investors. The rule provides some nonexclusive safe harbors with respect to the "reasonable steps" that will ensure conformity with the rule.

With respect to income, the safe harbor essentially requires verification based upon an IRS form. As the rule states:

In regard to whether the purchaser is an accredited investor on the basis of income, reviewing any Internal Revenue Service form that reports the purchaser's income for the two most recent years (including, but not...

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