Under the Securities Act of 1933, any
Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Regulation D (or Reg D) provides three exemptions from the registration requirements, allowing some smaller companies to offer and sell their securities without having to register the securities with the SEC.
Rule 504 or Regulation D provides an exemption from the registration of the federal securities laws for some companies when they offer and sell up to $1,000,000.00 of their securities in any 12 month period.
A company can use this exemption so long as it is not a Blank Check company and does not have to file reports under the Securities Exchange Act of 1934. Also, the exemption generally does not allow companies to solicit or advertise their securities to the public, and purchasers receive restricted securities, meaning that they may not sell the securities without registration or an applicable exemption.
Rule 504 does allow companies to make a public offering of freely tradable securities but only if one of the following circumstances is met:
(1) The company registers the offering exclusively in one or more states that require a publicly filed registration statement and delivery of a substantive disclosure document to investors;
(2) A company registers and sells the offering in a state that requires registration and disclosure delivery and also sells in a state without those requirements, so long as the company delivers the disclosure documents required by the state where the company registered the offering to all purchasers (including those in the state that has no such requirements); or
(3) The company sells exclusively according to state law exemptions that permit general solicitation and advertising, so long as the company sells only to “accredited investors.
An accredited investor is defined by federal securities law as:.
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