Regulation D

Regulation D Explained: A Complete Guide for Private Securities Offerings

If you’re raising capital for a business, investment fund, or real estate venture, you’ve likely encountered Regulation D (Reg D)—a critical exemption from SEC registration that enables private offerings of securities in the United States.

Used by thousands of companies each year, Reg D allows issuers to raise money legally from accredited investors while avoiding the complexity, cost, and delays of a full SEC registration. For attorneys, fund managers, and business owners, understanding how Regulation D works—and choosing the right exemption—is key to executing a successful and compliant capital raise.

What Is Regulation D?

Regulation D is a set of rules under the Securities Act of 1933 that provides exemptions from SEC registration for private placements of securities. It allows companies and investment funds to raise capital from individual and institutional investors under specific legal frameworks, reducing the regulatory burden for small and mid-sized issuers.

The most commonly used exemptions under Reg D are:

• Rule 504
• Rule 506(b)
• Rule 506(c)

Each rule has different requirements for investor eligibility, disclosure, solicitation, and filing obligations.

Regulation D Overview: Rule-by-Rule

Rule 504

• Raise up to $10 million in any 12-month period
• Can sell to accredited and non-accredited investors
• No general solicitation unless state law allows it and certain disclosures are met
• Commonly used by startups and smaller issuers

Rule 506(b)

• Unlimited capital raise
• Sell to unlimited accredited and up to 35 non-accredited but sophisticated investors
• No general solicitation or advertising permitted
• Widely used by real estate sponsors, private equity funds, and closely held companies

Rule 506(c)

• Unlimited capital raise
• General solicitation and public marketing are allowed
• All investors must be verified accredited investors
• Requires more stringent investor verification procedures (e.g., income/net worth checks)
• Often used in crowdfunding, tech startups, and public-facing fund launches

Who Can Use Regulation D?

Reg D is available to:

• Private companies raising equity or convertible debt
• Hedge funds, private equity, and venture capital funds
• Real estate investment syndicates and developers
• Startups seeking early-stage financing
• Franchisors and alternative investment sponsors

Both U.S.-based and foreign issuers can rely on Reg D for offerings made to U.S. investors.

Key Compliance Requirements

Even though Reg D exempts issuers from full SEC registration, it still includes critical compliance steps:

1. Form D Filing – Must be filed with the SEC within 15 days of the first sale.
2. Blue Sky State Filings – Required in each state where securities are sold.
3. Investor Disclosures – Required if non-accredited investors participate (especially under 506(b)).
4. Subscription Documents – Must include risk disclosures, investor certifications, and signature verification.
5. Ongoing Recordkeeping – Maintain detailed records of investors, offering proceeds, and use of funds.

Failure to follow Reg D requirements can result in regulatory penalties, disqualification from future exemptions, or rescission claims by investors.

Why Regulation D Matters

For professionals working in capital markets, law, and finance, Regulation D offers:

• A legally compliant framework for raising capital privately
• Access to high-net-worth and institutional investors
• Reduced legal and compliance costs compared to public offerings
• Flexibility in structuring offerings for various industries and asset classes

It’s a cornerstone of the U.S. private capital ecosystem, supporting trillions in investment annually.

Legal Considerations for Advisors and Issuers

As an attorney or compliance advisor, you should ensure your client:

• Selects the correct exemption (504 vs 506(b) vs 506(c))
• Understands advertising restrictions (especially under 506(b))
• Prepares a compliant Private Placement Memorandum (PPM)
• Follows investor verification rules (especially under 506(c))
• Maintains a clear audit trail of all offering documents and investor communications

Final Thoughts

Regulation D is one of the most powerful tools for raising capital in the U.S. If used properly, it enables companies and investment funds to access deep pools of investor capital with fewer regulatory hurdles. But it’s not without risk—noncompliance can derail your offering, attract scrutiny, and trigger legal liabilities.

For legal teams, fund sponsors, and business owners, the key to success lies in choosing the right exemption, preparing investor-ready offering documents, and maintaining strict procedural compliance from start to finish.