# kaal:claim:2714974-020

**Claim.** The investor verification requirement defeats the purpose of the Rule 506(c) liberalization: fearing liability for investor misrepresentations of personal wealth, most hedge funds raising money from individuals continue to use old Rule 506 rather than Rule 506(c).

**Type.** failure  **Support.** argued

**Holds when.**

- applies to funds raising capital from individual investors

**Source quote.**

> Fearing possible liability for investor misrepresentations of their personal wealth, most hedge funds that raise money from individuals continue to use the old Rule 506 rather than Rule 506(c).

**From.** Kaal and Oesterle, *The History of Hedge Fund Regulation in the United States* (2016), Hedge Funds Can Advertise Generally, page 18

**Cite as.** Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974

**Verify.** sha256 of source PDF `7764601d3ed5bb056b58949e8411eff9dfb9855f143719062030c980c5fa801b` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Oesterle%20-%202016%20-%20The%20History%20of%20Hedge%20Fund%20Regulation%20in%20the%20United%20States.pdf

**Failure mode.** Verification liability chills use of Rule 506(c)  (family: compliance-cost-and-barrier-to-entry)

**Topics.** law-and-legal-systems, risk-and-incentives

**Keywords.** rule-506c, investor-verification, liability-risk, jobs-act

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