General Solicitation and Private Placements: What You Can Say Publicly

Under Rule 506(b), general solicitation is anything that makes your offering visible to people you do not already have a relationship with. Public posts about the raise, open pitch events, blast emails, and press releases announcing the round all count. The test is the audience, not the wording. If just anyone could have seen it, you have generally solicited, and your offering no longer fits Rule 506(b).

The good news is the line is learnable, and it is mostly common sense once you see it. The bad news is that the most common violation starts with a founder doing something that feels completely natural: posting about the round.

What the Rule Actually Prohibits

Rule 506(b) conditions the exemption on not offering securities by any form of general solicitation or general advertising. The rule itself does not define the term, so the analysis runs on SEC guidance and caselaw under Section 4(a)(2), the statute behind Regulation D. Courts look at how offerees were selected, whether there was a pre-existing relationship between the issuer and them, and how private the offering really was.

What Counts as General Solicitation

• A social media post saying you are raising, sharing terms, or inviting investors. Public means public: LinkedIn, X, Facebook groups, Discord channels open to anyone.
• A press release or media interview announcing the financing.
• Mass emails to purchased lead lists, investor databases, or a general newsletter audience.
• Seminars, pitch nights, and demo days open to the public.
• A public website page advertising the offering or inviting readers to invest.

None of these become safe by adding fine print asking readers to confirm they are accredited. The SEC has repeatedly said a disclaimer cannot launder an unrestricted audience.

What Does Not Count

• One-on-one conversations and emails with people you actually know.
• Small group presentations to a defined set of contacts with real prior relationships.
• Outreach by a broker-dealer to accredited investors it already has genuine relationships with.
• Factual updates about the business: product launches, customer news, hiring, financial results, with no reference to an offering.
• Communications with existing shareholders.

The Founder Social Media Trap

The single most common way a 506(b) offering goes bad: a founder posts something like "we're opening our round" or "few slots left in our raise." That post is an unrestricted communication referencing an offering. It does not matter that it reached mostly friends. It does not matter that no one invested from it. The moment it exists, the offering is generally solicited.

Direct messages are different in kind. Messaging individual contacts you know, one at a time, is targeted communication. It is a conversation, not a broadcast. The difference between a post and a DM is the difference between an audience of anyone and an audience of one person you picked.

The Safe Harbor, Precisely

A pre-existing substantive relationship means the issuer or its agent knows the offeree well enough to be aware of their financial circumstances or sophistication, and the relationship was built before the offering was on the table. Relationships formed mid-offering, by a salesperson working a list, are not pre-existing. A broker-dealer can supply the relationship, which is one reason issuers engage placement agents: the agent's genuine, longstanding investor relationships count.

If You Crossed the Line

Before the first sale closes, you have options. The offering can be restructured to run under Rule 506(c), which allows general solicitation, so long as every investor goes through accreditation verification. After securities have been sold, those sales cannot be relabeled, and the analysis shifts to what disclosure and repair work the situation needs. If you are reading this because it already happened, talk to counsel before the next closing.