Regulation D (Reg D)
Regulation D provides exemptions from SEC registration for private placements, allowing companies to raise capital by selling securities to accredited investors without the cost and time of a full public offering.
Exam Tip
Reg D = private placement exemption. 506(b) = no advertising, can have 35 non-accredited. 506(c) = advertising OK but verify all accredited.
What is Regulation D?
Regulation D is a set of SEC rules that provide exemptions from the registration requirements of the Securities Act of 1933. It allows companies to raise capital through private placements without the expense and disclosure requirements of a registered public offering.
Reg D Exemptions Overview
| Rule | Max Raise | Investors | General Solicitation |
|---|---|---|---|
| Rule 504 | $10 million | Any | Sometimes allowed |
| Rule 506(b) | Unlimited | Up to 35 non-accredited | No |
| Rule 506(c) | Unlimited | Accredited only | Yes |
Rule 504 Details
| Feature | Requirement |
|---|---|
| Amount | Up to $10 million in 12 months |
| Investors | No specific limitations |
| Disclosure | Varies by state |
| Resale | Restricted unless state registered |
Rule 506(b) Details
| Feature | Requirement |
|---|---|
| Amount | No limit |
| Accredited | Unlimited number |
| Non-Accredited | Up to 35 sophisticated |
| Solicitation | No general solicitation/advertising |
| Disclosure | Required for non-accredited |
| Verification | Self-certification allowed |
Rule 506(c) Details
| Feature | Requirement |
|---|---|
| Amount | No limit |
| Investors | Accredited only |
| Solicitation | General solicitation allowed |
| Verification | Must take reasonable steps to verify |
Accredited Investor Verification (506(c))
| Method | Documentation |
|---|---|
| Income | Tax returns, W-2s, letter from CPA |
| Net Worth | Bank statements, appraisals, credit report |
| Professional | FINRA registration records |
| Third Party | Attorney or CPA letter |
Form D Filing
| Requirement | Deadline |
|---|---|
| When | Within 15 days of first sale |
| Content | Basic offering information |
| Where | SEC EDGAR system |
| Update | Annual amendment if offering continues |
Bad Actor Disqualification
Certain "bad actors" cannot use Rule 506:
- Convicted of securities fraud
- SEC orders or bars
- Court injunctions
- FINRA expulsions
Study This Term In
Related Terms
Private Placement
SecuritiesA private placement is the sale of securities directly to a limited number of sophisticated investors without a public offering, typically exempt from SEC registration under Regulation D.
Securities Act of 1933
SecuritiesThe Securities Act of 1933 is the federal law requiring registration and disclosure for new securities offerings, ensuring investors receive material information before buying, often called the "Paper Act" or "Truth in Securities Act."