Regulation D

If a company offers or sells any type of securities, it must comply with the regulations stipulated in the Securities Act of 1933 also known as the Securities Act.

The Securities Act ensures that the seller or company registers those securities under the act, or qualifies for an exemption under the registration requirements.

Regulation D, which is sometimes known as Rule 506 has two distinct exemptions.

Companies can rely on Rule 506 to raise an unlimited amount of money.
Regulation D has three additional safe harbors under Section 4(a)(2) with exemption registration requirements.

Rule 504, Rule 506(b), and Rule 506(c) allow companies to offer and sell certain securities without prior registration with the Securities and Exchange Commission (SEC) under the Securities Act.

To comply with the safe harbor requirements of Rule 506 (b) under Section 4(a)(2) some exemptions may be satisfied under the following circumstances:

  • Securities on sale or offer are not allowed to be advertised or solicited.
  • These securities can be sold to an unlimited number of accredited investors.
  • If securities are sold to non-accredited investors, they must be accompanied by a purchaser representative or have a sophisticated amount of knowledge of financial matters.
  • Companies can decide on the information they want to provide accredited investors as long as it complies with anti-fraud regulations of the securities laws.
  • Non-accredited investors should receive information and disclosure documents on the securities on offer.
  • Companies must be open to discussing transactions of sales and offers with prospective purchasers.
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