Corporate Finance & Securities

Raising Capital in Washington State: Part 4

ID-10014022In a recent post I provided an overview of raising capital under Washington States WAC 460-44A-505 (Rule 505). Today, I’m going to explain another exemption provided for by Federal and State law under which a company can raise capital, Rule 506. The basics of Rule 506, codified in WAC 460-44A-506, are as follows:

1) There is no maximum offering amount;

2) You can sell to an unlimited number of accredited investors;

3) You cannot sell to more than 35 non-accredited investors (you don’t want to sell to any non-accredited investors, however).

Disclosure Requirements

As discussed in our last post, the Securities Act of 1933 and 1934 were primarily put into place to protect investors in the wake of the stock market crash of 1929. In light of this, the most important factor in any securities offering is the disclosure of risks associated with the investments. Under the Rule 506 exemption, there is no prescribed format for presenting the disclosure document, but you must disclose all the material information necessary to allow potential investors to make an informed decision.

Filing Procedures

The following must be filed with the Securities Division of the Department of Financial Institutions:

1. A manually signed copy of the Form D filed electronically with the SEC.

2. $300 filing fee (checks should be made payable to the “Washington State Treasurer”); and

3. A report of the date of first sale to a resident of the State of Washington, or an indication that sales have yet to occur (may be included in cover letter).

The notice filing for the offering must be submitted to the Securities Division no later than 15 days after the first sale or receipt of a signed subscription agreement from a resident of the State of Washington, unless the due date falls on a Saturday, Sunday, or holiday, in which case the due date is the next business day.

You must file the Form D with the SEC as well as the Securities Division in order to qualify for the exemption.

For more information on raising capital for your business through Rule 506, please contact us today.


Collin Roberts

When he's not in the office, Collin enjoys IPAs and burgers at Latona Pub.

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