SEC Issues No Action Letter Regarding the Quality of the Issuer-Investor Relationship Under Reg. D

The SEC issued a no-action letter confirming that the quality of the relationship between an issuer and an investor is the most important factor in determining whether a substantive relationship exists between the two, and that such a relationship affects compliance with the general solicitation or general advertising requirements within the meaning of Rule 502(c) of Regulation D.

In response to a request by an online venture capital firm that facilitates indirect investment by pre-qualified, accredited and sophisticated Members, the SEC stated that the policies and procedures, as detailed in the request, will create a substantive, pre-existing relationship with prospective investors such that the offering and sale will not constitute general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D. The SEC noted however, that this position is based on the representations of the venture capital firm and that any different facts or conditions might require the SEC to reach a different conclusion.

See: SEC No-Action Letter Response.Related News: SEC Issues Guidance Statement Regarding Waivers of Disqualification under Regulation A and Rules 505 and 506 of Regulation D (March 13, 2015).