Private Placement Support
Regulation D is a provision that exempts some companies from the registration requirements associated with a public offering, allowing them to privately offer stock shares or bonds to pre-selected investors and institutions. Private placements are regulated by the U.S. Securities and Exchange Commission under Regulation D 504, 505, 506 (b), or (c).
Invited investors include high-net-worth individuals, banks, financial institutions, mutual funds, insurance companies, and pension funds. Private placements offer the advantage of fewer regulatory requirements compared to public offerings. Companies, engaging in private placements are not required to provide the disclosure that would be required in a registered offering, which means that investors may have less information to make an informed investment decision than, for example, stock purchased on a stock exchange. However, those selling securities under Regulation D must still comply with all applicable laws, including anti fraud, civil liability, or other provisions of federal securities laws.
Regulation D includes two SEC rules—Rules 504 and 506—that issuers often rely on to sell securities in unregistered offerings. Most private placements are conducted pursuant to Rule 506, which allows issuers to raise an unlimited amount of money in offerings relying on one of two possible Rule 506 exemptions—Rules 506(b) and 506(c). An issuer relying on Rule 506(b) may sell to an unlimited number of accredited investors, but to no more than 35 non-accredited investors.
