SEC Regulation CE

What is SEC Regulation CE?

SEC Regulation CE is a regulation that provides guidance on securities exempted from registration for California Corporations. The SEC requires companies that are registered with the SEC to provide investors with clear and concise financial information on their businesses. This includes annual, quarterly, and current reports to ensure that investors can access up-to-date information on the company’s financial performance. The SEC also requires companies to ensure that their financial statements are accurate and consistent with Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

SEC Regulation CE allows certain securities to be exempted from the registration requirements of the Securities Act of 1933. This exemption is granted to issuers who meet the conditions outlined in paragraph (n) of Sec. 25102 of the California Corporations Code.

Section 25102(n) exempts securities offerings to qualified purchasers. It also includes a “test the waters” provision. This provision allows issuers to publish and share a general announcement of the proposed offering in writing. The announcement can be sent to both qualified and non-qualified investors.

The SEC adopted Regulation CE in 1996. Its purpose is to reduce the regulatory difficulty that small businesses face when registering securities. This makes it easier for them to raise funds.

The federal-state exemption defers to the state of California state the scope of the securities registration exemption. 

That said, Regulation CE does impose two federal requirements, the first of which limits offerings to $5 million. The second only allows restricted securities in a Regulation CE transaction, meaning, securities can only be resold if the resale is registered with the SEC or the resale is made exempt from this requirement.

The issuer must provide a written disclosure to the purchaser at least five days before the securities offered are sold or the purchaser accepts a commitment to purchase. The disclosure statement must meet the requirements of Regulation D of the Securities Act. It must also include information as required by the California Commissioner of Corporations. For support and additional information, explore our Capital Markets solutions.