Home Blog Reg D: Exemption Types, Benefits, Filing Process Explained

Reg D: Exemption Types, Benefits, Filing Process Explained

This page explains regulation d, how it works, its benefits and requirements, and how a lawyer from ContractsCounsel can help you.

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What are Reg D Exemptions?

Reg D, or Regulation D, provides exemptions for companies to raise money without having to register the securities with the Securities and Exchange Commission (SEC), but they need to meet specific criteria.

There are also various types of Reg D exemptions to know about. Read the rest of this article to explore them and other information about how Reg D works.

What are Reg D Benefits?

There are various advantages of using Reg D. These include the following:

  • Reduced expenses. Without having to register offerings, companies can save money.
  • Increased funding. Some Reg D exemptions don’t have a cap on how much capital you can raise.
  • Accredited investors. Many Reg D offerings involve accredited investors, which can prevent issues and enable a smoother process of raising money for the business.
  • Faster offering execution. Thanks to having less of a regulatory requirement, Reg D provides a faster and more streamlined offering.

What are the Reg D Exemptions?

There are three Reg D exemptions that vary a bit in how they work. Here’s a rundown of them.

Rule 504

This exemption enables companies to raise up to $10 million within a 12-month period. It’s mostly beneficial for startups that need a modest amount of money to help them encourage growth.

Rule 506(b)

This Reg D exemption enables companies to raise an unlimited amount of money from accredited investors. They can also use up to 35 non-accredited investors, but general solicitation and general advertising aren’t allowed. Rule 506(b) works well for companies who already have a pool of investors.

Rule 506(c)

This rule is appealing because companies are allowed to use general solicitation and general advertising to attract investors. The SEC states that issuers need to verify that their investors are accredited, but their updated guidelines have made this a smoother process as there are many ways in which accreditation can be verified. However, they must be in accordance with the SEC’s safe harbor methods.

How Does the Reg D Filing Process Work?

You’ll have to go through the following steps when completing a Reg D.

  • Gather the offering documents. A private placement memorandum (PPM) is commonly used and it includes information about the company and offering.
  • Find investors. The company will reach out to potential investors, who can be accredited or non-accredited depending on the exemption. They can also make use of advertising under Rule 506(c).
  • Verify investors. If you’re making use of Rule 506(c), you’ll have to verify that your investors are accredited. This is an important step to ensure compliance.
  • Close the Reg D offering. When investors commit to providing funds, the offering will close. Securities will be issued.
  • File Form D. After your first sale but within 15 days of it, you’ll have to file Form D with the SEC. This is to notify them of the offering.

How Do You Make Reg D Offerings Successful?

There are things you can do to increase the effectiveness of your Reg D offering. These include the following:

  • Work with a skilled team. You should have experienced professionals, such as lawyers and financial advisors, at your side so that you know how best to navigate the private placements.
  • Understand your company’s goals. Take the time to understand your company’s values, goals, and growth strategy. This will help you to attract investors to your offering.
  • Draft a PPM. This document needs to be easy to understand and professionally drafted. Some important information it should include is your company’s strengths and the benefits of the offering.
  • Find the right investors for your company. You want the investors to be the correct match for your company, so do your homework before working with them.

What are Some Mistakes to Avoid with Reg D Offerings?

There are some common errors to avoid so that you don’t harm your company’s reputation. These include the following:

  • Lack of compliance. If you don’t meet all the Reg D requirements, you can land yourself in legal trouble and cause harm to your company’s reputation.
  • Providing wrong information. If your documents don’t include accurate information, this can make investors struggle to trust you.
  • Not verifying your investors. When using Rule 506(c), you must take reasonable steps to ensure that your investors are accredited. If you don’t do this, you will be guilty of non-compliance and could have to pay fines.
  • Forgetting about state securities laws. There are state securities laws that could require you to have to file other documents or follow additional rules. Always make sure that you comply with all laws, but a lawyer can help you ensure you’re not missing anything important.

Do You Need a Lawyer for Reg D?

It’s a good idea to hire a lawyer for Reg D offerings. This is because a lawyer will ensure that you don’t make mistakes that could cost you, legally or financially.

Here are some ways in which a qualified lawyer from ContractsCounsel, an online legal network that connects clients with vetted lawyers, can assist you.

  • They’ll confirm which exemption under Reg D is best for your company’s goals and investment needs.
  • They’ll draft and/or review all documents you require. This ensures they’re legal and transparent.
  • They’ll consider all SEC and state-securities laws to ensure you remain compliant.
  • They’ll help you verify your accredited investors.
  • They’ll provide guidance on how to file Form D so that it’s accurate.
  • They can communicate and negotiate with investors on your behalf.

Where can you hire a lawyer for Reg D offerings?

If you need to find a lawyer for Reg D offerings, hire one from ContractsCounsel. They’ll provide you with legal assistance throughout the process. They can also review your offering documents.

To request a review, go to the ContractsCounsel marketplace.

1. Post your project. Include details about the review you require so lawyers better understand your project.

2. Wait to receive multiple lawyer bids.

3. Review the lawyer profiles according to factors such as their credentials, experience, and previous projects they’ve completed on the platform.

4. Select a lawyer who fits your legal requirements and hire them for the job.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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