Ten years ago, raising capital was a private affair, primarily done through friend ‘n family under Reg D 506(b) or often on golf courses. Today, it happens through LinkedIn, DMs through our social media, Instagram Stories, and Facebook boosted posts.
We have entered the era of the “Issuer-Influencer.” Syndicators, founders, and fund managers are no longer just operators; they are content creators building personal brands to attract deal flow and capital.
While this shift provides the possibility of unprecedented scale, it also creates friction with securities laws that were written decades before the internet existed. For issuers utilizing Regulation Crowdfunding (Reg CF) and Regulation D Rule 506(c), the line between “building a brand” and “general solicitation” of an investment is thinner than you might think.
Here is how to leverage the power of social media for your capital raise without inviting an SEC enforcement action.
The Shift towards General Solicitation (Rule 506(c))
Historically, most private capital raises were conducted under Rule 506(b), which strictly prohibits “general solicitation.” This meant you couldn’t talk about your deal on social media.
However, the popularity of Rule 506(c) has changed the game. This exemption allows you to advertise your offering broadly on podcasts, LinkedIn posts, and Facebook ads provided you sell only to accredited investors and take “reasonable steps” to verify their status.
For the modern syndicator, this is a green light to market. But it comes with a catch: Verification that all 100% of the investors are accredited if you use social media to attract investors (General Solicitation), you cannot rely on self-certification (a simple “check the box”) like you can under Rule 506(b).
You can verify by collecting tax returns, bank statements, and investment statements, but investors don’t want to provide you with this information. 90%+ of the time, the verification happens through a letter from the investors’ CPA representing the investor’s accredited status. Note that the letter can also be provided by an attorney or broker-dealer but that is used infrequently. If your marketing funnel doesn’t account for this rigorous verification step, your entire exemption could be at risk.
The Danger of “Hype” and Promissory Language
Social media algorithms reward hyperbole. Titles like “How to 10x Your Money” or “Guaranteed Passive Income” go viral. In the securities world, these phrases are toxic.
The antifraud provisions of federal securities laws apply to everything you tweet, post, or say on a live stream.
- Avoid Absolutes: Words like “Guaranteed,” “Safe,” or “No Risk” should be scrubbed from your vocabulary.
- Balance is Key: You cannot present only the upside. If you discuss potential returns, you must reasonably balance that with the risks involved.
- Projections: While forward-looking statements are permitted under certain conditions, they must be reasonable and accompanied by clear assumptions. Posting a chart showing a hockey-stick graph without context is a recipe for regulatory scrutiny.
The “Testimonial” Minefield
In e-commerce, customer testimonials are gold. In capital raising, they are a minefield. Following the modernization of the marketing rules (specifically for Investment Advisers, though the principles act as a good guide for issuers), the use of testimonials has opened up, but disclosure is paramount.
If you are paying an influencer, a “brand ambassador,” or even a happy past investor to post about your deal, this is considered a promoter relationship. Under Section 17(b) of the Securities Act of 1933, any person who is paid to publish a description of a security must disclose:
- The fact that they are being paid.
- The amount of the consideration.
A hidden #ad hashtag at the bottom of a post is rarely sufficient in the eyes of regulators. The disclosure must be prominent and clear. If an influencer promotes your Reg CF or Reg D offering without disclosing they were paid cash or equity to do so, both the influencer and the issuer could face penalties.
Building a Compliance Archive
The internet is forever, but you still need your own records. If you are running a Reg D 506(c), Reg A, or Reg CF campaign, you should maintain a digital archive of every social media post, comment response, and video transcript related to the offering. In the event of an audit or an investor dispute three years from now, your ability to produce the exact marketing materials used to solicit the investment is your first line of defense.
Conclusion: Content is an Asset, Compliance is the Foundation
Becoming an “Issuer-Influencer” is a viable strategy in 2025. It builds trust, lowers your cost of capital, and creates a loyal community of investors.
However, do not let the casual nature of social media fool you into casual compliance. Whether it’s a 280-character post or a 60-second Reel, it is a securities communication if it relates to your capital raise.
Before you launch your next campaign, ensure your marketing strategy is reviewed by legal counsel who understands not just the law, but the nuances of digital platforms.
Ready to scale your raise while staying compliant? Contact Crowdfunding Lawyers today to review your marketing materials.