Regulation D
Quick Definition
SEC rules that provide exemptions from registration requirements, allowing companies to raise capital through private placements.
Key Takeaways
- Provides exemptions from SEC registration for private capital raises
- Rule 506(b) allows up to 35 non-accredited investors without general solicitation
- Rule 506(c) permits advertising but restricts sales to accredited investors only
- Form D must be filed with the SEC within 15 days of the first sale
- Most widely used exemption for startups, hedge funds, and private equity
What Is Regulation D?
Regulation D is a set of SEC rules that provide exemptions from the Securities Act of 1933's registration requirements, enabling companies to raise capital through private placements without the time and expense of a full public offering. The three main exemptions are Rule 504 (offerings up to $10 million), Rule 506(b) (unlimited amount to up to 35 non-accredited investors plus unlimited accredited investors, with no general solicitation), and Rule 506(c) (unlimited amount to accredited investors only, with general solicitation and advertising permitted). Companies using Regulation D must file Form D with the SEC within 15 days of the first sale. Regulation D is the most widely used exemption for private offerings, facilitating capital raising for startups, private equity funds, hedge funds, and real estate syndications.
Regulation D Example
- 1A startup raised $5 million from accredited investors under Rule 506(b) of Regulation D without registering the offering with the SEC.
- 2A hedge fund used Rule 506(c) to advertise its offering publicly, but was required to verify that all investors met the accredited investor income and net worth thresholds.
Related Terms
Accredited Investor
An individual or entity that meets SEC-defined financial thresholds, qualifying them to invest in certain unregistered securities offerings.
SEC (Securities and Exchange Commission)
The primary U.S. federal agency responsible for regulating securities markets, protecting investors, and enforcing federal securities laws.
Prospectus
A formal legal document filed with the SEC that provides detailed information about an investment offering to potential investors.
Regulation A+
An SEC exemption that allows smaller companies to raise up to $75 million from the general public with reduced registration requirements.
FDIC
Independent federal agency that insures bank deposits up to $250,000 per depositor, per institution, and supervises financial institutions for safety and soundness.
Insider Trading
The illegal practice of trading securities based on material, non-public information obtained through a position of trust or confidence.
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