New compliance and disclosure interpretations (C&DIs) regarding general solicitation, which address:

A no-action letter (No-action Letter) concurring in Citizen VC, Inc.'s (CitizenVC) conclusions that:

the policies and procedures described in the No-action Letter will create a substantive, pre-existing relationship between CitizenVC and prospective investors; and

the offering and sale on the Site of interests in the SPVs will not constitute general solicitation or general advertising within the meaning of Rule 502(c).

The use of an unrestricted, publicly available website constitutes a general solicitation and is not consistent with the prohibition on general solicitation and advertising in Rule 502(c) if the website contains an offer of securities.

Rule 506(c), which does not require compliance with Rule 502(c), may be available to issuers when offering or selling securities through unrestricted, publicly available websites or other forms of general solicitation.

The relationship between new members will pre-exist any offering.

Prospective members would only be presented after the prospective investor becomes a member.

CitizenVC creates the SPVs for investments in particular portfolio companies and not as blind pools for a later investment opportunity.

The information that an issuer can disseminate about itself under Rule 502(c). An issuer may disseminate information not involving an offer of securities widely without violating Rule 502(c). For example, factual business information that does not condition the public mind or arouse public interest in a securities offering is not an offer and may be disseminated widely. Information that involves an offer of securities through any form of general solicitation would contravene Rule 502(c). (Question 256.24)

What constitutes factual business information. What constitutes factual business information depends on the facts and circumstances. Factual business information typically is limited to certain information about the issuer and its business. Factual business information generally does not include predictions, projections, forecasts or opinions with respect to the valuation of a security, nor for a continuously offered fund would it include information about past performance of the fund. (Question 256.25)

Offers to investors who have a pre-existing relationship with the issuer. An offer to a person with whom an issuer or a person acting on the issuer’s behalf has a pre-existing, substantive relationship would not constitute a general solicitation under Rule 502(c). The existence of a pre-existing, substantive relationship is not the exclusive means of demonstrating the absence of a general solicitation in a Regulation D offering. (Question 256.26)

Communications with persons who do not have a pre-existing relationship with the issuer. There are circumstances under which an issuer or a person acting on the issuer’s behalf may communicate information about an offering to a person with whom the issuer does not have a pre-existing, substantive relationship without having the information deemed a general solicitation. Whether there has been a general solicitation is a fact-specific determination. In general, the greater the number of persons without financial experience, sophistication or any prior personal or business relationship with the issuer that are contacted by an issuer or persons acting on its behalf through impersonal, non-selective means of communication, the more likely the communications are part of a general solicitation. (Question 256.27)

Whether someone other than a broker-dealer may form a pre-existing relationship with a prospective offeree. Investment advisers registered with the SEC may form a pre-existing, substantive relationship with a prospective offeree that is a client of the adviser as a means of establishing that a general solicitation is not present (see Practice Note, General Solicitation and Startup Capital Raising: Guidance and Questions: Working through Broker-dealers and Other Third Parties). (Question 256.28)

What constitutes a "pre-existing" relationship. A pre-existing relationship is one that the issuer has formed with an offeree prior to the commencement of the securities offering or that was established through either a registered broker-dealer or investment adviser prior to the registered broker-dealer or investment adviser’s participation in the offering. See the E.F. Hutton & Co., Inc. SEC No-Action Letter ( (Dec. 3, 1985)). (Question 256.29)

The minimum waiting period required to establish a pre-existing relationship. There is no minimum waiting period for an issuer or a person acting on its behalf to establish a pre-existing, substantive relationship with a prospective offeree in order to demonstrate that a general solicitation is not involved. However, subject to limited accommodations for certain private funds, the issuer must establish a pre-existing, substantive relationship prior to the commencement of the offering, or, if the relationship was established through either a registered broker-dealer or investment adviser, the relationship must be established prior to the time the registered broker-dealer or investment adviser began participating in the offering. (Question 256.30)

What makes a relationship "substantive". For purposes of demonstrating the absence of a general solicitation under Rule 502(c), a "substantive" relationship is one in which the issuer or a person acting on its behalf has sufficient information to evaluate, and does, in fact, evaluate, a prospective offeree's financial circumstances and sophistication in determining the prospective investor's status as an accredited or sophisticated investor. The C&DIs also clarify that self-certification alone (by checking a box) without any other knowledge of a person's financial circumstances or sophistication is not sufficient to form a "substantive" relationship. (Question 256.31)

Whether anyone other than a broker-dealer or an investment adviser can form a pre-existing relationship with a prospective offeree. Because the SEC has stated that the presence or absence of a general solicitation is always dependent on the facts and circumstances of each particular case, there may be facts and circumstances in which a person, other than a registered broker-dealer, including an issuer, could establish a pre-existing, substantive relationship sufficient to avoid a general solicitation. However, in the absence of a prior business relationship or a recognized legal duty to offerees, the C&DIs clarify that it is likely more difficult for an issuer to establish a pre-existing, substantive relationship, especially when contemplating or engaged in an offering over the Internet. For more information, see Practice Note, General Solicitation and Startup Capital Raising: Guidance and Questions: Working through Broker-dealers and Other Third Parties. (Question 256.32)