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Jun 08, 2022 View:

warning Re Soliciting Investors

I have deleted the initial post to protect the poster, but leave the rest of the thread as this is good info for anyone trying to raise money... -Admin

Here is something you might find informative: there is currently a prohibition against general solicitation of an investment offering. What you just did (announce to the world that you're looking for investment funding) -- and this is something I have seen others UNWISELY do -- is unfortunately considered "general solicitation". As a result, should you ever find an investor, and that investor gets cold feet down the road, he/she could be entitled to get their money back from you and you may be facing serious civil or even criminal penalties.

There are changes in the works in regards to this (see the link below), but the SEC has not ruled on this yet. Regardless, there will very likely be other steps you must first take before announcing to the world that you are raising money and seeking investors. I know, it stinks, but that's the law at this time.

Anyway, I do wish the best of luck to you...


Edited by grehorst

Jedd and Chris are 100% correct. Written general solicitations, like your post, are currently impermissible under federal securities law. You haven't blown your whole capital raise, but you have created some issues that you need to work through with a qualified lawyer.

Also, bear in mind that there are two layers to securities regulation: the federal (i.e. SEC) regulations; and state (so-called "blue sky") regulations. Be mindful of both, and make sure to ask your lawyer about both sets of regulation to make sure you have a full understanding of what applies to you and when.

Good luck with the distillery.


The JOBS Act mandated that the SEC issue rules easing the ban on "general solicitations" for Rule 506 offerings. Yesterday the SEC Staff issued their proposed rules, which are now subject to public comment. You can see the SEC's press release and proposed rules here:

NOTE: These rules are only proposed rules, and even when they are promulgated you should speak with a lawyer to make sure your capital raise and solicitations are compliant with Federal Securities laws. Even with the new rules, there are a lot of pitfalls for the unwary. It is not true that the ban on general solicitations has been lifted, and even when the rules are promulgated, they will only ease the ban, not lift it.

NOTE ALSO: These new rules have no effect on state "blue sky" securities laws.


This guy was soliciting investment from members of the American Distilling Institute forum... a group of people that could be described as 'acquaintances'/'friends'. Slightly different to taking out an advert in The Times.


tl5612, While I appreciate your definition, it is no way a legal interpretation of the law. While we talk on this forum, it is open to the public and has many viewers who are not active in any other fashion than to see what goes down. While I also enjoy everyone's advice, I wouldn't consider them friends until I actually met them. This is the same as posting a note on a board at work and considering your co workers to all be "friends". Chris is right to delete it and give warning.


Should probably unstick this post since the laws have changed since then. General solicitation has been legal since mid-2013 with Section 506 of the JOBS act I believe.


Here is the current state of general solicitation for investors (from an attorney who is starting a crowd funding site for small craft producers) as of today...

The JOBS Act contained 2 parts. First, it lifted the ban on general solicition. Second, it allowed companies to crowdfund up to $1M online from general public.


After you put it that way I now feel that this post will still be useful and should probably stay up. Thank you!


I feel like this post needs to be bumped. Federal law does now allow for open solicitation to anyone and everyone.


Reply:On 3/1/2014 at 10:52 AM, grehorst said:

Also, does this limitation only apply to an issuer of stock? Would it apply to an in issuer of bonds or solicitations to borrow? And if no stock is being issued, for example, to participate as a member in an LLC, would the limitation have applied?


advertising publicly varies by Reg D 506 b, 506 c, Reg S, Reg CF.   Some of the earlier, older information is not now correct and is overly cautious (though accurate at the time, BITD).   It is not a requirement that all be accredited investors.  YMMV.