Regulatory Framework
Compliance & Resources
Everything broker-dealers and registered investment advisors need to navigate Regulation D exempt offerings with confidence.
Understanding Regulation D
Regulation D is a set of rules promulgated by the U.S. Securities and Exchange Commission (SEC) that provides exemptions from the registration requirements of the Securities Act of 1933. These exemptions allow companies to raise capital through the sale of equity or debt securities without the cost and time of a full SEC registration.
The most commonly used exemptions are Rule 506(b) and Rule 506(c), both of which permit issuers to raise an unlimited amount of capital from accredited investors. Understanding the distinctions between these rules — and the compliance obligations each imposes — is essential for any intermediary operating in the private placement market.
Exemption Rules
Private Offering Exemption
Permits issuers to raise unlimited capital from up to 35 non-accredited but sophisticated investors and an unlimited number of accredited investors. General solicitation and advertising are prohibited. Issuers must take reasonable steps to verify that investors meet the applicable standards.
- No general solicitation or advertising permitted
- Up to 35 non-accredited sophisticated investors allowed
- Unlimited accredited investors
- Form D must be filed within 15 days of first sale
General Solicitation Exemption
Permits issuers to engage in general solicitation and advertising, provided that all purchasers are accredited investors and the issuer takes reasonable steps to verify accredited investor status. This rule was created by the JOBS Act of 2012.
- General solicitation and advertising permitted
- All purchasers must be accredited investors
- Issuer must take reasonable steps to verify accreditation
- Form D must be filed within 15 days of first sale
Form D Filings
Form D: Notice of Exempt Offering
Issuers relying on Regulation D exemptions are required to file a Form D with the SEC within 15 calendar days after the first sale of securities in the offering. Form D is a brief notice that includes basic information about the company, the offering, and the exemption being claimed. It is not a registration statement and does not require SEC review or approval.
Prepare the Filing
Gather issuer information, offering details, and the specific Regulation D exemption being claimed (Rule 506(b) or 506(c)).
File via EDGAR
Submit Form D electronically through the SEC's EDGAR system within 15 calendar days of the first sale of securities.
State Notice Filings
Many states require a separate notice filing (often called a 'blue sky' filing) in addition to the federal Form D. Requirements vary by state.
Annual Amendments
If the offering continues beyond one year, an annual amendment to Form D must be filed to update the SEC on the status of the offering.
Accreditation Verification
Who Qualifies as an Accredited Investor?
Under Rule 501 of Regulation D, an accredited investor is an individual or entity that meets specific financial thresholds or holds certain professional credentials. Proper verification of accredited investor status is a critical compliance obligation — particularly under Rule 506(c), where issuers must take reasonable steps to verify status rather than simply relying on investor self-certification.
Individual — Income Test
Income exceeding $200,000 in each of the two most recent years (or $300,000 jointly with a spouse or spousal equivalent), with a reasonable expectation of the same income level in the current year.
Individual — Net Worth Test
Net worth exceeding $1,000,000, either individually or jointly with a spouse or spousal equivalent, excluding the value of the primary residence.
Professional Credentials
Holders of Series 7, Series 65, or Series 82 licenses in good standing qualify as accredited investors regardless of income or net worth.
Institutional Investors
Entities with total assets exceeding $5,000,000, including banks, insurance companies, registered investment companies, and certain trusts and family offices.
Reference Materials