Under Regulation D, Rule 506 of the Securities Act of 1933, which of the following statements is correct regarding the exemption from registration?

Answer options:

The offering amount is limited to million.

The issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors.

The issuer must file a full registration statement with the SEC.

Sales to non-accredited investors are strictly prohibited.

How to approach this question

Know Reg D Rules: Rule 504 (Small, $10M), Rule 506 (Unlimited $, Sophisticated investors). 506 = Unlimited Accredited + 35 Sophisticated Non-Accredited.

Full Answer

B.The issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors.✓ Correct

The issuer may sell to an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors.

Rule 506 allows an issuer to raise an unlimited amount of capital from an unlimited number of accredited investors and up to 35 non-accredited investors who must be 'sophisticated' (have financial knowledge).

Common mistakes

Confusing Rule 504 and 506 limits.

Question 21 All questions Question 23

Practice the full CPA REG Practice Exam

72 questions · hints · full answers · grading

More questions from this exam

Q01Under Circular 230, which of the following scenarios represents a permissible contingent fee arra...Hard Q02A CPA is preparing a tax return for a client who wishes to take a position that the CPA believes ...Medium Q03Regarding the retention of client records under Circular 230, which of the following statements i...Hard Q04Under the Ultramares rule regarding accountant liability to third parties for negligence, which o...Medium Q05Taxpayer A filed their Year 1 tax return on April 15, Year 2. The return omitted ,000 of gross in...Medium

View all 72 questions →