Quick Answer
The accredited-only, general-solicitation exemption lets an issuer advertise an offering publicly, but every purchaser must be an accredited investor, with no non-accredited purchasers permitted at all. The issuer must take reasonable steps to verify each purchaser's accredited status, and this unit does not test the specific verification methods themselves.
This exemption is the mirror image of the no-solicitation private placement exemption. Where that safe harbor bans public marketing and tolerates a mix of accredited and non-accredited purchasers, this one flips the trade: advertise freely, but every single buyer has to clear the accredited bar.
What Trade-Off Does This Exemption Offer?
- General solicitation and general advertising are permitted.
- Every purchaser in the offering must be an accredited investor. No non-accredited purchasers are permitted at all.
- The issuer must take reasonable steps to verify that each purchaser is accredited.
Think of it this way: The no-solicitation exemption and this exemption sit on opposite ends of a seesaw. Ban general solicitation, and a few sophisticated non-accredited buyers are welcome alongside accredited ones. Advertise freely, and every buyer must clear the accredited bar with none left over.
Exam Tip: Gotchas
- The no-solicitation private placement exemption and this exemption trade general-solicitation freedom for purchaser mix in opposite directions. The no-solicitation exemption allows a mix of accredited and up to 35 non-accredited purchasers but bans general solicitation. This exemption allows general solicitation but requires every purchaser to be accredited.
Which General Conditions Apply, and Which Don't?
An offering under this exemption must satisfy the integration and resale-limit general conditions covered later in this unit. The information-delivery and general-solicitation-ban conditions do not apply here: there is no non-accredited purchaser to protect with delivered information, and general solicitation is expressly permitted.
Exam Tip: Gotchas
- This unit does not test the specific methods an issuer may use to verify accredited-investor status. Here, only "the issuer took reasonable steps to verify" matters.
What Should You Check on Exam Day?
- Confirm general solicitation is fully permitted here, unlike the no-solicitation private placement exemption.
- Confirm zero non-accredited purchasers are permitted; a single non-accredited buyer breaks this exemption.
- Confirm the issuer must take reasonable steps to verify accredited status; do not expect this unit to test the specific verification methods.
- Confirm the information-delivery and solicitation-ban general conditions do not apply here, while integration and resale limits still do.