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Requirements of a Reg D Private Placement

Raising capital and investing in private companies involves an intricate process for companies and investors that is governed by stringent regulatory requirements. While the introduction of Rule 506(c) under the JOBS Act does potentially address some of the issues around advertising and broader reach, the Regulation D offering process remains a complex mix of compliance, marketing, and due diligence. [For more on the stages of a private placement see this post].

In this post, however, we examine the basic requirements that define an offering as a private placement.

Requirements of a Private Placement (under Regulation D)

  1. The securities may be sold only to “accredited investors.”
  2. All the offerees and purchasers must have access to the same kind of information and must be able to understand and evaluate that information.
  3. The issuer and broker-dealer must take all reasonable steps to ensure that all provided information is complete and accurate. We refer to this as due diligence.
  4. All of the offerees must have access to meaningful current information concerning the issuer.
  5. For private placements not marketed under 506(c) rules, these offerings cannot be the subject of advertising, general solicitation, or public meetings.
  6. The issuer must exercise reasonable care to assure that the purchasers of the securities are not acquiring the security for redistribution.
  7. The issuer must file a notice of sale on Form D with the SEC within 15 days after the first sale of securities. Subsequent notices are required every six months after the first sale and 30 days after the last sale. [1]

As always, please note that nothing here should be construed as legal, finance, or tax advice and is provided for educational purposes only.

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