Rule 206

Rule 206 (17 CFR 227.206) is the Regulation Crowdfunding rule that lets a company test the waters before it files a Form C. The company may ask the public, orally or in writing, whether people would be interested in a contemplated Reg CF offering, as long as it accepts no money and no commitment and its written communications carry three required statements.

What the rule permits

The SEC added Rule 206 in amendments adopted in November 2020 and effective March 15, 2021. Before then a Reg CF issuer could say almost nothing about a planned offering until the Form C was filed. Under the rule, an issuer contemplating a Reg CF offering may:

• publish a page, ad, email, video, or presentation describing the business and the planned raise
• collect an indication of interest through a response form, which may ask for a name, address, telephone number, and email address
• do all of this publicly, without the audience limits of a private placement

The communications are treated as offers for purposes of the federal antifraud rules, so every claim in them must be accurate and consistent with the later Form C.

The three required statements

Each solicitation must state, in substance, that:

1. no money or other consideration is being solicited, and if sent in response, will not be accepted
2. no offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed, and then only through an intermediary's platform
3. a person's indication of interest involves no obligation or commitment of any kind

The rule text is at Cornell LII, 17 CFR 227.206.

Filing and the end of the window

Any written communication or broadcast script used under Rule 206 must be included with the Form C when it is filed (Rule 201(z)). The window closes when the Form C is filed. After that, communications fall under Rule 204, the Reg CF advertising rule: a notice that mentions the terms of the offering is limited to specified facts and must direct people to the funding portal or broker-dealer platform. Sales happen only on that platform.

Rule 206 does not preempt state law for the pre-filing period, which is one reason issuers ask counsel how the campaign interacts with blue sky laws.

Related rules

• Rule 255 is the Regulation A counterpart, with a longer window that runs until qualification.
• Rule 241 covers an issuer that has not yet chosen which exemption to use.

Further reading

• Reg CF testing the waters: Rule 206, clause by clause
• testing-the-waters-legends-and-disclaimers
• testing-the-waters-materials-and-filing
• reg-cf-forms-explained
• advertising-rules-by-exemption

This page is general information about securities rules, not legal advice. The exact wording and placement of the statements, and what a particular company may say, are questions for its own securities counsel and its intermediary.