SEC Regulation E

What is SEC Regulation E?

SEC Regulation E exempts the securities issued by small business investment companies (SBICs) and investment companies acting as business development companies (BDCs) from having to be registered under the Securities Act of 1933. The exemption stands as long as certain conditions are met including keeping the aggregate offering price of all securities that might be sold by an issuer within a 12-month period below $5 million.

Originally adopted in 1958, Regulation E was made available to SBICs, registered under the Investment Company Act of 1940, in accordance with Section 3(c) of the Securities Act. In 1984, Section 3(b) allowed for the eligibility of BDCs for this exemption by permitting the Securities and Exchange Commission (SEC) to include any class of securities to the securities exempted from the Securities Act by Section 3.

Rule 604 of Regulation E states that companies who want to gain this particular exemption have to declare their interest to the SEC by filing Form 1-E. Meanwhile, Rule 605 calls for these companies to furnish an offering circular to entities solicited by the issuer as well as file the offering circular with the SEC if the offering exceeds $100,000.

Regulation E was intended to ease the reporting burden on small business entities. As such, filing Form 1-E on a limited offering with the SEC is less costly and time-consuming than filing a registration statement under the Securities Act. The form includes a range of information, from names and addresses of the issuer, its affiliates, directors, officers and counsel to information on whether the issuer is offering or thinking about offering any other securities.

Form 1-E, which must also include the offering circular, must be filed electronically via the EDGAR computer system for the receipt, acceptance, review and dissemination of documents submitted in electronic format to the SEC. For support and additional information, explore our investment company compliance solutions.