SEC Regulation D

What is SEC Regulation D?

SEC Regulation D, commonly referred to as Reg Dex or Reg D, has three rules – Rules 504, 505 and 506. These rules provide exemptions from registering securities with the SEC for certain companies that offer and sell them.

These companies are smaller in size and often can’t bear the financial burden of a typical SEC registration. The intent is to expedite the process of raising capital for small companies.

Rule 504 of Regulation D offers exemptions for companies. These exemptions allow them to offer and sell up to $1 million of their securities within a 12-month period. Under Rule 505, qualifying companies are limited to selling up to $5 million of their securities within a 12-month period. They must provide financial statements to investors. They can sell to an unlimited number of accredited investors, as well as up to 35 other individuals. Solicitation or advertising to sell securities is not allowed. Purchasers can only receive restricted securities.

Rule 506 of Reg D is a “safe harbor” for the private offering exemption. This exemption is outlined in Section 4(a)(2) of the Securities Act.

Companies can raise unlimited capital under Rule 506, as long as they do not advertise to sell securities. They must also provide financial statements to prospective buyers and answer all their questions. Companies can sell to accredited investors without limit. They can also sell to up to 35 other purchasers. These purchasers must have the knowledge to weigh up the risks and benefits of investing.

Rule 506 of Reg D is the most common choice for filers. Companies offering under Regulation D must file a Form D in XML format via the SEC’s EDGAR system for the receipt, acceptance, review and dissemination of documents submitted in electronic format to the Commission.

For support and additional information, explore our Capital Markets solutions.