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Regulation D (Reg D)

Regulation D (Reg D) is a provision under the U.S. Securities and Exchange Commission's (SEC) securities laws that allows companies to raise capital from accredited investors through a private placement. A private placement is an offering of securities that is not registered with the SEC and is not offered to the public.

Under Reg D, companies can sell securities to accredited investors, such as high net worth individuals or institutional investors, without having to go through the full registration process required for public offerings. The securities are typically offered through a private placement memorandum (PPM), which provides information about the company and the terms of the offering.

There are three rules under Reg D that allow companies to raise capital from accredited investors:

Rule 504 - allows companies to raise up to $5 million in a 12-month period from accredited and non-accredited investors.

Rule 505 - allows companies to raise up to $5 million in a 12-month period from accredited investors and up to 35 non-accredited investors.

Rule 506 - allows companies to raise an unlimited amount of capital from accredited investors and up to 35 non-accredited investors. Rule 506 offerings are further divided into two types: Rule 506(b) and Rule 506(c).

Rule 506(b) offerings allow companies to solicit and advertise their offerings to investors, but only if they have a pre-existing relationship with the company. Rule 506(c) offerings allow companies to solicit and advertise their offerings to the general public, but only from accredited investors.

Overall, Reg D is a securities law provision that allows companies to raise capital from accredited investors through a private placement. Companies must comply with SEC and state securities laws, and are subject to certain limitations on the number and type of investors they can accept. Reg D is a useful tool for companies that want to raise capital from accredited investors without going through the full registration process required for public offerings.

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