The Securities Act of 1933 mandates that any offer to sell securities be registered through the SEC, or qualify for an exemption. There are many different ways for securities to be considered exempt, however three common ways are through Regulation D (Reg D). Reg D provides three rules, 504, 505, and 506 that all outline exemptions. These rules allow some companies to sell and offer securities without registering these securities with the SEC, but instead filing a Form D notice.
Regulation D Federal Exemptions
Companies that rely on Reg D are exempt from registering their securities with the SEC, however they must file a Form D with the SEC after first selling their securities. Form D includes the names and addresses of the company?s promoters, executive officers and directors and brief details about the offering.
| Rule 504 | Rule 506(b) | Rule 506(c) | |
| General Solicitation allowed? | Allowed only in certain circumstances, with several restrictions | Not allowed | Allowed |
| Issuer Requirements | Restrictions on ‘bad actor’ disqualifications applied. Excludes the typical reporting and investment company restrictions | Restrictions on ‘bad actor’ disqualifications applied | Restrictions on ‘bad actor’ disqualifications applied |
| Requirements for Investors | No requirements | Unlimited accredited investors allowed, but only 35 maximum non-accredited investors permitted | Unlimited accredited investors allowed, but issuers must take precautions to ensure that investors are, in fact, accredited investors |
| Resale Restrictions | Yes, restrictions on resale, except in several circumstances | Yes, restrictions on resale | Yes, restrictions on resale |
| State Requirement Exemptions? | No, state restrictions and regulations still apply | Yes, state laws are preempted. Notice may be required. | Yes, state laws are preempted. Notice is still be required. |
| SEC Filing Requirements | Form D required | Form D required, if non-accredited investors involved, additional information is required | Form D required |
| Limits on Offerings Within a Year | $5 million limit | No limits | No limits |
Regulation D State Exemptions
For individual state exemptions, please visit the individual state websites to review the rules and regulations regarding exemptions that they offer. If you would like Colonial Stock to help with your blue sky filings and exemptions, please contact us.