Regulation D Private Placement Toolkit

Resources to assist issuers, placement agents and their counsel in conducting private placements in reliance on the Regulation D safe harbors from the registration requirements of the Securities Act.

Practical Law Corporate & Securities

Under the Securities Act of 1933 ( www.practicallaw.com/1-382-3805) (Securities Act), any offer or sale of securities must either be registered with the SEC or qualify for an exemption from the Securities Act's registration requirements. Regulation D ( www.practicallaw.com/2-382-3744) contains three main rules that provide safe harbors from those registration requirements: Rule 504, Rule 505 and Rule 506. These rules allow some companies to offer and sell their securities in private placements ( www.practicallaw.com/3-382-3710) , without having to register the transaction with the SEC.

Rule 504 and Rule 505 under Regulation D are available for certain offerings with an aggregate offering price of up to $1 million and $5 million, respectively. These safe harbors were established to help small businesses raise capital. In contrast, Rule 506 under Regulation D does not place any limit on the amount of money an issuer can raise. Rule 506 is the most frequently used Regulation D safe harbor and one of the most important means of raising capital in the US.

According to an October 2015 SEC report:

  • In 2014, Regulation D offerings were used to raise $1.33 trillion, compared to $1.35 trillion raised through SEC-registered offerings.

  • Since 2009, Rule 506 offerings accounted for more than 99% of reported capital raised through Regulation D offerings (with the remaining 1% raised in offerings under Rule 504 and Rule 505).

While a company relying on a Regulation D safe harbor can avoid Securities Act registration, it must file a Form D ( www.practicallaw.com/2-382-3490) with the SEC within 15 days after the first sale of securities. Form D must also be filed at the state level, in accordance with blue sky law ( www.practicallaw.com/7-382-3275) requirements, if the offering is conducted under Rule 506. Form D is a brief notice setting out specified information about the offering, including the amount and value sold, whether broker-dealers ( www.practicallaw.com/3-383-2168) were used and the states where the securities were offered and sold.

Historically, the use of general solicitation and general advertising in any private placement was prohibited. However, in September 2013, Rule 506 was amended to add a new subsection (c) that permits general solicitation in offerings made under that subsection as long as the securities are sold only to accredited investors ( www.practicallaw.com/0-382-3212) and other specified conditions are met. Issuers that wish to conduct a Rule 506 offering without using general solicitation may continue to do so under subsection (b) of Rule 506.

This Toolkit provides resources to help issuers, placement agents ( www.practicallaw.com/3-382-3692) and their counsel conduct private placements in reliance on the Regulation D safe harbors.

 

Practice Notes

 

Standard Documents

 

Standard Clauses

 

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