In 2010, Tim and Teri decide to form a new S-corporation, TTP Corp., under the New Columbia Business Corporation Act for their high-end women's clothing manufacturing business. Tim and Teri are the only owners of this company. They enter into a shareholders agreement in which they call the interests in the company "corporate pieces," they do away with the board of directors, and agree to co-manage the business. Tim and Teri are both very savvy business people, having run their own companies for 20+ years combined, and are each wealthy individuals. TTP Corp.'s business is growing successfully, and within a year they need more capital to manufacture more inventory to fill all the orders that are coming in. In early 2011, Tim and Teri decide to try to raise $200,000 by selling 10% of its corporate pieces to investors. Tim went to John, one of his friends, for advice on raising capital. Tim trusted John's advice because John was the owner of a restaurant chain that recently raised money successfully in a private placement. John told Tim that he could raise money from investors under something called a "Rule 506 Offering," as long as they only got investors who were very wealthy. Tim and Teri, following John's advice, decide to find investors by preparing a mailing with a cover letter, a short description of the company and its corporate pieces, and a reply card describing this "exclusive opportunity." The reply card contained a qualification questionnaire that each of the potential investors had to complete, indicating if they were accredited investors or if they had a qualified purchaser representative. Tim and Teri mailed this package to 450 women in the U.S., in the hope that these women would want to invest in the success of the business. Of the women they mailed to, 80 sent back response cards expressing interest in purchasing TTP Corp.'s corporate pieces. Half of the reply cards contained completed questionnaires from non-accredited investors, and of those, only 10 indicated that they had a qualified purchaser representative. However, Tim and Teri decided to accept them as investors anyway. Within 45 days, all $200,000 had been raised. The following year, Tim and Teri decide to sell all of the assets of the business to TakeOver Inc. During the due diligence period, TakeOver Inc.'s CEO discovers the $200,000 offering that Tim and Teri conducted in 2011. He notifies Tim and Teri of his concern that the offering was made in violation of the securities laws. He says this could pose a problem for the acquisition. You work at a law firm specializing in securities law cases. Tim and Teri come see your boss, a partner at the law firm, about the allegations by TakeOver Inc.'s CEO. Tim and Teri maintain that the stock in TTP Corp. was not a security, and therefore, the sale of the stock to the investors was not a violation of Section 5 of the Securities Act. They also argue that even if it was a security, there was no violation because they followed the requirements for a "Rule 506 Offering" that John had described to them. Your boss asks you to prepare a report discussing the merits of Tim and Teri's arguments, citing appropriate rules and caselaw.