Regulation D has been a widely used exemption ever since introduction in the early 1980’s. Various changes over the years have modernized the program providing a more effective path for issuers seeking capital.
 
Regulation D was adopted by the SEC in 1982 under the authority of the Securities Act of 1933. The primary goal was to make it easier for small businesses to raise capital through private offerings without the need to file a full registration statement. Regulation D provides three key exemptions, each with different criteria regarding the type of offering, the number of investors, and other conditions.
 
Original Key Components and Programs of Regulation D (1982):

• Rule 504: Allowed offerings of up to $1 million within a 12-month period. This rule was aimed at providing an easier path for smaller businesses to raise capital.
• Rule 505: Allowed offerings of up to $5 million, with restrictions on the number of non-accredited investors and a general ban on public solicitation.
• Rule 506: This rule provided a broader exemption, permitting offerings to an unlimited number of accredited investors (wealthy individuals or institutions that meet certain income or asset thresholds) and up to 35 non-accredited investors, provided that the offering met certain requirements, such as not engaging in public solicitation or advertising.

Changes Since Introduction
 
There have been several changes since the original components of Regulation D were introduced in 1982:
 
– Regulation D 504 now has a $10m annual cap
– Regulation D 505 was terminated as an available exemption
– Regulation D 506(b) now allows up to 35 non-accredited investors every 90 days the offering is open
– The JOBS Act created several changes as outlined below
 
Jumpstart Our Business Startups (JOBS) Act (2012)

One of the most significant changes to Regulation D came as part of the Jumpstart Our Business Startups (JOBS) Act of 2012. The JOBS Act was designed to make it easier for small businesses to access capital, particularly through crowdfunding and private placements.

• Title II – General Solicitation: Under Title II of the JOBS Act, Rule 506(c) was formally introduced, allowing issuers to use general solicitation or advertising to attract accredited investors, provided they take steps to verify that the investors are indeed accredited.
• Title III – Crowdfunding: The JOBS Act also legalized certain types of equity crowdfunding under separate rules, offering an additional pathway for businesses to raise capital from the public, albeit with lower investment caps and restrictions.

Regulation D joins Regulation CF and Regulation A as available exemptions for securities sales. Issuers now have tremendous choices for executing a capital raise. Interested in raising capital?  Call us today to discuss:  (720) 586-8610