When companies raise capital in the U.S., the regulatory pathway they choose matters—not just for compliance, but for who must be involved in the offering. One of the biggest differences across exemptions is whether a broker-dealer intermediary is required.
Regulation Crowdfunding (Reg CF) mandates the use of an intermediary. Issuers must conduct a Reg CF raise through either a registered broker-dealer or a registered funding portal. This requirement exists because Reg CF targets everyday (non-accredited) investors, and regulators want built-in investor protections. The intermediary is responsible for hosting the offering, providing disclosures, handling investor education, facilitating transactions, and performing basic compliance checks. Red Rock Securities Law specializes in preparing “Direct Issuance” Regulation CF offerings wherein the issuer executes on their own custom investor raise portal administered by the Broker Dealer Intermediary.
By contrast, Regulation D (Reg D) does not require a broker-dealer. Reg D offerings are typically limited to accredited investors, who are presumed to have greater financial sophistication and ability to bear risk. Because of this, issuers can raise capital directly—though they must be careful not to pay transaction-based compensation to unregistered “finders,” which could unintentionally trigger broker-dealer registration issues.
Regulation A (Reg A) sits somewhere in the middle. Technically, a broker-dealer is not required to conduct a Reg A offering. Issuers can sell securities directly to investors, including non-accredited investors. However, in practice, most successful Reg A offerings strongly benefit from using a broker-dealer. Broker-dealers can assist with distribution, investor outreach, marketing compliance, suitability analysis, and—most importantly—actual sales execution, which can significantly improve capital-raising outcomes.
In summary:
- Reg CF: Broker-dealer or funding portal is required.
- Reg D: Broker-dealer is not required (and often not used).
- Reg A: Broker-dealer is not required, but highly recommended.
Choosing the right exemption isn’t just about how much you want to raise—it’s about who your investors are, how you reach them, and the infrastructure you need to do it compliantly and effectively.
