Raising capital without registering securities with the SEC is possible—but only if you do it correctly. SEC Regulation D is the most commonly used exemption from federal securities registration, and it plays a critical role in private offerings for startups, real estate sponsors, and private funds.
At Red Rock Securities Law, we regularly advise issuers on how to structure Regulation D offerings that comply with federal and state securities laws while minimizing legal risk. This guide explains the basics of Regulation D, the key exemptions available, and common compliance pitfalls to avoid.
What Is SEC Regulation D?
Regulation D is a set of exemptions under the Securities Act of 1933 that allows companies to raise capital through private offerings without registering those securities with the U.S. Securities and Exchange Commission (SEC).
Instead of undergoing a full public registration—which can be costly and time-consuming—issuers may rely on Regulation D if they meet specific requirements related to:
- Investor qualifications
- Disclosure obligations
- Marketing restrictions
- Filing and notice requirements
Regulation D does not eliminate securities law obligations—it simply provides a different compliance pathway.
Why Regulation D Matters for Issuers
Regulation D exists to promote capital formation while maintaining investor protections. Private offerings are permitted primarily because they are limited to investors who are considered financially sophisticated or capable of bearing economic risk.
For issuers, Regulation D offers:
- Faster access to capital
- Lower regulatory costs
- Greater flexibility in deal structuring
- The ability to remain a private company
However, these benefits come with strict compliance requirements that must be followed carefully.
The Three Primary Regulation D Exemptions
Regulation D includes three main exemptions: Rule 504, Rule 506(b), and Rule 506(c). Each serves a different purpose and carries different legal obligations.
Rule 504: Limited Capital Raises
Rule 504 permits offerings of up to $10 million in any 12-month period.
Key characteristics:
- No federal limit on the number of investors
- Investors do not need to be accredited
- General solicitation is typically not permitted but may be available depending on state law
- Subject to full state “blue sky” regulation
Because of its state law complexity, Rule 504 is used less frequently and typically for smaller, localized offerings.
Rule 506(b): Traditional Private Placements
Rule 506(b) is the most widely relied-upon Regulation D exemption.
Key characteristics:
- Unlimited amount of capital may be raised
- Up to 35 non-accredited investors permitted within a 90 day period
- Non-accredited investors must be financially sophisticated
- General solicitation and advertising are prohibited
- Accredited investors require fewer disclosures
Rule 506(b) offerings typically rely on pre-existing relationships between issuers and investors.
Rule 506(c): General Solicitation Permitted
Rule 506(c) allows issuers to publicly market their offerings, provided that additional safeguards are met.
Key characteristics:
- Unlimited capital raising
- General solicitation is allowed (websites, social media, advertising)
- All investors must be accredited
- Issuers must take reasonable steps to verify accredited investor status
Verification requirements go beyond investor self-certification and often involve financial documentation or third-party verification.
Who Qualifies as an Accredited Investor?
An accredited investor is defined under SEC rules and generally includes individuals who meet one or more of the following criteria:
- Annual income exceeding $200,000 (or $300,000 with a spouse)
- Net worth over $1 million, excluding primary residence
- Certain professional certifications, such as Series 7, 65, or 82 licenses
Accredited investor status is central to Regulation D compliance and must be evaluated carefully.
Form D Filing Requirements
Issuers relying on Regulation D must file Form D with the SEC.
Important Form D considerations:
- Filed electronically through the SEC’s EDGAR system
- Due within 15 days after the first sale of securities
- Provides notice—not approval—of the offering
- Many states also require Form D notice filings and fees
Late or missing Form D filings can create regulatory and transactional issues, especially in future offerings.
Regulation D and State Securities Laws
Although Regulation D provides a federal exemption, state securities laws still apply.
- Rule 506 offerings preempt substantive state review, but states may require notice filings
- Rule 504 offerings are fully subject to state registration or exemption requirements
- Each state has different filing deadlines and fee structures
Coordinating federal and state compliance is a critical part of any private offering.
Common Regulation D Compliance Pitfalls
We frequently see issuers encounter problems due to:
- Improper general solicitation under Rule 506(b)
- Inadequate verification of accredited investors under Rule 506(c)
- Incomplete or misleading offering disclosures
- Failure to comply with state notice requirements
- Missing Form D filing deadlines
These issues can lead to investor rescission rights, regulatory enforcement, and future fundraising restrictions.
How Red Rock Securities Law Can Help
Regulation D offerings are not “check-the-box” transactions. Each offering requires careful analysis of the issuer’s business, investor base, and capital-raising strategy.
Red Rock Securities Law advises clients on:
- Selecting the appropriate Regulation D exemption
- Structuring compliant private placements
- Preparing private placement memoranda (PPMs)
- Managing Form D and state filings
- Ongoing securities law compliance
- Regulation D Investor Portal Builds to administer the offering
Our goal is to help clients raise capital efficiently while reducing regulatory risk.
Conclusion: Regulation D Requires Strategic Legal Guidance
SEC Regulation D remains the foundation of the U.S. private capital markets, but it is also an area where small mistakes can have significant consequences.
Contact Red Rock Securities Law to discuss how we can support your Regulation D offering from structure to closing.
