Final answer:
The assertion about Rule 506 allowing sales to an unlimited number of securities to 35 non-accredited investors, accredited investors, and relatives of issuers is incorrect. Rule 506 permits an issuing company to sell securities to an unlimited number of accredited investors and up to 35 non-accredited, sophisticated investors without mentioning relatives as a separate category.
Step-by-step explanation:
The assertion made in the student's question about Rule 506 is not entirely accurate. Rule 506 is indeed a regulation under Regulation D of the Securities Act, which allows an issuing company to raise an unlimited amount of capital from accredited investors and up to 35 non-accredited investors. However, Rule 506 does not specifically mention relatives of issuers as a separate category. Instead, the focus is on the nature of the investors being accredited or not, and their number if they are not accredited.
Under Rule 506(b), an issuing company can offer securities to an unlimited number of accredited investors and up to 35 non-accredited investors, provided these non-accredited investors are sophisticated - meaning they have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.
Rule 506(c), on the other hand, allows companies to solicit and advertise their offerings to the general public, provided that all the purchasers in the offering are accredited investors and the issuing company takes reasonable steps to verify their accredited status. Therefore, the statement in the question would be false since it does not accurately reflect the provisions of Rule 506 regarding non-accredited investors and relatives of issuers.