Regulation D is a safe harbor that allows issuers of securities to lawfully sell unregistered securities. Under Regulation D the SEC has set forth Rules 504, 505 and 506, which establish different exemptions from Securities Act registration. These rules allow issuers to raise capital with reduced regulatory costs and filing requirements. For example, in a private placement issuers must file a notice on Form D within 15 days after the first sale of securities in the offering with the SEC, as opposed to the full registration statement required for a public offering of securities (e.g. an IPO)
Below is a chart detailing rule 504, 505, and 506, including the amount of capital that can be raised, the number and type of investors, and whether the issuer can solicit the general public.
Reg D Safe Harbor
Number of accredited investors
* Issuers may not use Rule 505, 506(b), and 506(c) if the issuer or any of its principals are “bad actors” meaning they have a relevant criminal conviction or other disqualifying event.
Test takers should be aware of the ways issuers can raise capital by selling securities and avoid the costs of a full-blown registration. In addition, understanding the limitations on these types of offerings, including the capital-raising thresholds, number and type of permitted investors, and the nature of allowable solicitations are all part of the required knowledge for a securities professional.
Series 7, Series 9, Series 10, Series 24, Series 65, Series 66, Series 79