Can I switch from 506(c) back to 506(b)?
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Not for the same offering. Once you generally solicit, such as a public post about the fund, that offering can't rely on 506(b), and every investor in it must be verified accredited under 506(c). Deleting the post doesn't undo it, because people already saw it. Decide which kind of raise you're running before the first post.
Everything here is for educational purposes only and is not legal, tax or investment advice, or an offer to buy or sell any security. Laws and thresholds change and depend on your facts, so talk to a qualified attorney before acting.
Key facts
- General solicitation is not allowed under 506(b).
- An offering that generally solicits must meet 506(c).
- Under 506(c), every purchaser must be verified accredited.
- Removing a public post doesn't undo the solicitation.
Transcript
Founder: I'll try 506(c) for a bit. If I hate it, I'll switch back.
Operator: That door only swings one way.
Operator: The moment you generally solicit, like a public post about the fund...
Operator: ...every investor in that offering has to be verified accredited.
Founder: What if I delete the post?
Operator: People already saw it. That's what counts.
Founder: Even for friends I already know?
Operator: Anyone who comes in through that offering. So decide which kind of raise you're running before the first post.
Founder: So I'll just try 506(c) for a bit...