What is a Reg D offering?
SEC Regulation D offers a range of exceptions to the registration requirement for public offerings of securities. Generally, an offering that relies on Regulation D (also known as a “private placement”) is not required to comply with the various rules associated with traditional public offerings conducted through a broker-dealer, provided certain filing and disclosure requirements are met. An issuer under Regulation D must also comply with various state requirements.
How is a Reg D offering different from an IPO or Reg CF offering?
An offering of stocks or bonds under the Securities Act of 1934 (the “Exchange Act”), commonly called an “initial public offering” or “IPO” requires compliance with a broad range of SEC and FINRA rules, including initial and ongoing disclosure requirements, the requirement to obtain audited financial statements, bad actor exceptions for management and others, and other pre-qualification requirements. It is the most expensive means of fundraising available, but also allows an unlimited amount of money to be raised from the public.
An offering conducted under Title III of the Jobs Act of 2012, commonly called a “Regulation CF offering” or just “crowdfunding” allows general solicitation to non-accredited investors with streamlined disclosure requirements, but must be performed through a FINRA registered intermediary (crowdfund portal). Issuers may raise up to about $1MM with reviewed GAAP basis financial statements or $5MM with audited financial statements. Non-accredited investors are limited in the amount of funds they may invest in Regulation CF offerings per year.
I’m thinking of raising money using Reg D. Do I need an attorney?
An issuer under Regulation D is not required to be represented by an attorney. However, an attorney is strongly recommended to ensure compliance with the numerous federal and state rules and other requirements. A company that fails to comply may risk enforcement action and civil penalties imposed by the SEC and state securities regulators in any state where the company has sold securities in reliance on Regulation D.
Thinking of a private placement under Regulation D? We can help you prepare for success! Contact us for more information.