Investor Assistance (800) 732-0330 www.investor.gov

Investor alert

advertising for Unregistered 

securities offerings

The SEC’s Office of Investor Education and Advocacy is 

issuing this Investor Alert to educate individual investors 

about advertisements and announcements for investment 

opportunities in certain securities offerings. General 

advertising is permitted in certain offerings as a result 

of rules adopted by the SEC as required by the Jumpstart 

Our Business Startups (JOBS) Act. 

You may begin to see advertising and announcements for 

opportunities to invest in certain securities offerings, sometimes called private placements. These offerings may be for 

shares in a company or interests in a private fund, such as 

a hedge fund or venture capital fund. The advertising may 

be through a number of different means, including the 

Internet, social media, seminars, print, or radio or television 

broadcast. The rules permitting this general advertising 

take effect on September 23, 2013. 

What is a private placement?

a securities offering exempt from registration with the 

seC is sometimes referred to as a private placement. Under 

the federal securities laws, a company or private fund may 

not offer or sell securities unless the offering has been 

registered with the seC or an exemption is available. 

Private and public companies engage in private placements 

to raise funds from investors. Private funds, such as hedge 

funds, also raise investment capital through private 

placements.

Private placements are not subject to some of the laws 

and regulations that are designed to protect investors, 

such as disclosure requirements that apply to registered 

offerings. 

as noted above, the seC recently adopted rules to permit 

general solicitation or advertising for certain securities 

offerings that are exempt from registration. as described 

below, these offerings, referred to here as Rule 506(c) 

offerings, must comply with a number of requirements.

Am I qualified to invest in a Rule 

506(c) offering?

Only accredited investors may invest in a Rule 506(c) 

offering. This limitation exists because these offerings do 

not have the same investor protections as, and have unique 

risks when compared to, offerings that are registered with 

the seC.
2

an accredited investor, in the context of an individual 

investor, is a person who:

had income in excess of $200,000 (or $300,000 

with a spouse) in each of the prior two years, and 

reasonably expects the same for the current year, 

OR

has a net worth over $1 million, either alone or 

with a spouse (excluding the value of the person’s 

primary residence or any loans secured by the 

residence (up to the value of the residence)). 

How will the company or private 

fund know whether I am an accredited 

investor?

In a rule 506(c) offering, the company or private fund 

is required to take reasonable steps to verify your 

accredited investor status, which could include reviewing 

documentation, such as W-2s, tax returns, bank and 

brokerage statements, credit reports and the like. 

Depending on the circumstances, the company or private 

fund may rely on a written confirmation from a third 

party to verify your accredited investor status. The seC 

does not require any specific verification method or process

for companies or private funds for these offerings. 

n 

n 

Third-party verification. If the company or 

private fund accepts a written confirmation from a 

third party to verify whether you are an accredited 

investor, the third party may be a registered brokerdealer, seC-registered investment adviser, licensed 

attorney or certified public accountant. The third 

party could be engaged by the company or private 

fund, or could be retained by you (e.g., your personal

broker-dealer, investment adviser, attorney or 

certified public accountant). You can obtain 

information about a registered broker by visiting 

FInra’s BrokerCheck website. You can obtain 

information about an investment adviser by visiting 

the seC’s Investment adviser Public Disclosure 

(IaPD) website. You can obtain information about 

a licensed attorney or certified public accountant 

by contacting the appropriate state bar or board 

of accountancy.

You do not have to provide any information if you do not 

feel comfortable doing so. If you do not provide all of the 

requested information, you should not be able to invest 

in the particular offering if the company or private fund is 

unable to verify that you are an accredited investor. 

If the company or private fund offering the securities does 

not take steps to verify your accredited investor status or 

allows you to participate in the offering even though you 

do not meet the income or net worth criteria discussed 

above, this may be a warning sign that the company or 

private fund is not complying with the federal securities 

laws and is something to consider before investing in the 

offering. 

Investor Assistance (800) 732-0330 www.investor.gov
3

What should I consider when investing 

in private placements?

n Investing in securities, including through private 

placements, involves risk. You can lose your entire 

investment.

n You will not be able to sell the securities you invest 

in as easily as you would a publicly traded stock. You 

may have to hold your investment indefinitely.

n You will likely be provided with less information 

about your investment than would be required to be 

disclosed to you if the securities were sold to you in 

an offering registered with the seC. Companies and 

private funds engaging in private placements have 

more discretion in what information to disclose to you.

n If the company or private fund does not regularly 

file reports with the seC, there will likely be less 

information available about your investment on 

an ongoing basis. 

You should read and understand all the information that 

is provided to you regarding the investment, including any 

offering memorandum or private placement memorandum

that describes the investment. Pay particular attention to 

any risk factors that are described to you. In addition, 

you should carefully consider the terms of any subscription 

agreement or other agreements you have to enter into 

for the investment.

Companies and private funds engaging in a private placement generally must file a notice of sales with the seC 

for each new offering by making a notice filing on what is 

called a Form D. These filings are required no later than 15 

calendar days after the first sale of securities in the offering 

and contain some basic information about the company 

or private fund and the securities offering. Forms D are 

publicly available through the seC’s eDGar dat

t sec.gov/edgar/searchedgar/webusers.htm. 

abase 

a

Where can I go for help?

If you have a question or concern about an investment, or 

you think you have encountered fraud, please contact the 

seC, FInra or your state securities regulator to report 

the fraud and to get assistance.

U.s. securities and exchange Commission

office of Investor education and advocacy

100 F street, ne

Washington, D.C. 20549-0213

(800) 732-0330

sec.gov

investor.gov

Financial Industry regulatory authority (FInra)

FInra Complaints and tips

9509 Key West avenue

rockville, Maryland 20850

(301) 590-6500

finra.org/Investors/

north american securities administrators association 

(nasaa)

750 First street, ne

suite 1140

Washington, D.C. 20002

(202) 737-0900

nasaa.org

Investor Assistance (800) 732-0330 www.investor.gov
Additional Information

For our Investor Bulletin about hedge funds, visit 

sec.gov/investor/alerts/ib_hedgefunds.pdf. 

For the seC’s recent rules providing for general 

advertising in certain unregistered securities offerings, 

visit sec.gov/rules/final/2013/33-9415.pdf.

For our Investor Bulletin about accredited investors 

visit sec.gov/investor/alerts/ib_accreditedinvestors.pdf.

For FInra’s BrokerCheck resource, visit www.finra.

org/Investors/toolsCalculators/BrokerCheck/. 

For our Investment adviser Public Disclosure (IaPD)

website, visit www.adviserinfo.sec.gov.

For our Investor alert about private oil and gas 

offerings, visit sec.gov/investor/alerts/ia_oilgas.pdf. 

For a nasaa investor alert regarding private placements, visit www.nasaa.org/22284/informed-investoralert-private-placement-offerings/. 

For more information about certain exemptions for 

private placements, visit sec.gov/answers/regd.htm.

For “Using eDGar - researching Public Companies,” 

visit investor.gov/researching-managing-investments/

researching-investments/using-edgar-researchingpublic-companies.

For additional investor educational information, see 

the seC’s website for individual investors, investor.gov. 

The Office of Investor Education and Advocacy has provided this information as a service to investors. 

It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the 

meaning or application of a particular law or rule, please consult with an attorney who specializes in 

securities law.

SEC Pub. No. 157 (9/13)