Reg D Basics
Regulation D (“Reg D”) is an SEC governed program created under the Securities Act of 1933. Reg D allows companies of all sizes to raise capital through the sale of securities to private investors. The term “securities” refers to stock shares, promissory notes, bonds, certain real estate, and recently has also included some crypto currencies. It is designed to provide an exemption to the costly and time consuming practice of registering securities, which is done when a company wants to go public; however, small companies can rarely afford the financial burden of registration and continued listing of its company’s securities. Enter Regulation D.
Reg D consists of 9 Rules; 2 basic “Exemption Rules” (504 and 506) which are relied upon to raise capital and 6 Administrative Rules that establish the Reg D basics for using the exemption:
- Rule 500 - Use of Regulation D
- Rule 501 - Definitions and terms used in Regulation D
- Rule 502 - General conditions to be met
- Rule 503 - Filing of notice of sales
- Rule 504 - Exemption for offerings not exceeding $10M
- Rule 505 - No longer available effective May 22, 2017
- Rule 506 - Two part exemption for unlimited offering amount
- Rule 507 - Disqualifying provision relating to exemptions 504 and 506
- Rule 508 - Insignificant deviations from a term, condition or requirement
Rules 504 and 506 stipulate the following:
- Limits on amounts of capital,
- Different types of investors allowed to participate, and
- Different methods for conducting a capital raise.
Before preparing a Reg D Offering (PPM prep), you’ll need to read and understand the Reg D Basics above. Reg D is fairly simple when using one of our PPM Templates as a roadmap to help keep the required disclosures in one place, while designing the investment layout for best results.
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Regulation D Rules
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