Regulation D offering: Overview, definition, and example
What is a Regulation D offering?
A Regulation D offering refers to a type of private securities offering that is exempt from SEC registration under Regulation D of the Securities Act of 1933. It allows companies to raise capital without going through the time and expense of a public offering, as long as they comply with certain rules—such as limits on who can invest and how the offering is marketed. Most Regulation D offerings are made under Rule 506(b) or Rule 506(c).
Why is a Regulation D offering important?
A Regulation D offering is important because it provides startups, private companies, and investment funds with a faster and more cost-effective way to raise capital. It also gives investors—especially accredited investors—access to private investment opportunities that may not be available in public markets. By avoiding SEC registration, companies save time, but they must still follow disclosure, filing, and investor eligibility rules to avoid enforcement risk.
Understanding a Regulation D offering through an example
A startup raises $3 million from a group of accredited angel investors under Rule 506(b) of Regulation D. The company files Form D with the SEC and provides investors with disclosure documents, but does not have to register the offering. Because Rule 506(b) prohibits general solicitation, the company can only approach investors with whom it has a pre-existing relationship.
Example of how a Regulation D offering clause may appear in a contract
Here’s how a Regulation D offering clause may appear in a securities purchase agreement:
"The offer and sale of the Securities are being made pursuant to an exemption from registration under Regulation D of the Securities Act of 1933, as amended, and the Company shall file a Form D with the Securities and Exchange Commission within the required timeframe."
Conclusion
A Regulation D offering allows private companies to raise funds without registering with the SEC, as long as they follow specific rules about disclosure and investor eligibility. It’s a common tool for early-stage companies, venture funds, and other issuers seeking capital efficiently. Understanding the conditions of a Regulation D offering helps both issuers and investors navigate the legal framework and reduce risk.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.