SEC Regulation D deals with private placement. Regulation D was introduced with the intent to allow small and medium-sized businesses the opportunity to raise capital without having to bear the time and expense of filing and reporting to the SEC.
Following the changes made under the JOBS Act, there are now two vehicles that investors can use to crowdfund under Regulation D. They can choose whether they want to use Rule 506(b) or 506(c).
Regulation D Rule 506(b)
Allows companies to raise funds from an unlimited number of accredited investors and up 35 non-accredited investors.
General solicitation (also known as "promotional advertising") for the investment is not allowed under Rule 506(b).
Specific details related to the offering must be posted behind a "gate," which investors can only access once they've self-certified.
Regulation D Rule 506(c)
Open to accredited investors only.
Investors involved must be vetted providing supporting documentation.
General solicitation, or promotional advertising, is permitted.
When raising under Regulation D, a company must prepare a private placement memorandum or PPM for investors. Essentially, the PPM is a legal document that spells out the terms of the investment for investors.
A PPM includes information such as a description of the business, financial statements, and a rundown of objectives and potential risks for investors. It may also outline a payment schedule or maturity date if debt is being offered.
After the PPM and Due Diligence has been conducted and approve, the company may start selling securities..
Depending on which offering you select will determine how you can market your campaign.
With proper planning you should start receiving investments on the launch of your campaign.
On average, campaigns run for 60-90 days. But every campaign must run for a minimum of 21 days.
Per regulations set forth by the SEC, each company must disclose any material changes during the time of their fundraise. Each investor should be notified and investors must re-confirm their investment within 5 business days. If an investor does not re-confirm their investment within 5 business days of a material change in the offering, their investment will be automatically canceled.
We will work with our escrow partner to make sure the funds from escrow will be transferred to the company upon completion of the offering.
Investments are made official when the campaign has ended. Investors will have access to their summary statements and a portfolio of their investments once they have been closed.
Note that investors have the right to cancel their investment for any reasons up to 48 hours before a closing occurs.