Regulation D allows you to solicit an unlimited amount of funds from any interested accredited investor, and they are allowed to have up to 35 non-accredited investors in the mix as well. Though, notably, the non-accredited investors must qualify as "sophisticated investors" under SEC guidelines.
Rule 506 (b) is a “non-exclusive safe harbour” enabling issuers to offer and sell an unlimited amount of securities.
There are some conditions for issuers to meet:
Regulation D Rule 506(b) allows companies to raise funds from an unlimited number of accredited investors and up 35 non-accredited investors.
Investors are usually asked to certify via a questionnaire that they meet the criteria to be considered accredited.
Non-accredited investors must be given a substantial amount of disclosure information pertaining to the investment.
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) is open to accredited investors only..
Unlike Rule 506(b), where investors are allowed to self-certify, the investors involved must be vetted, usually by providing supporting documentation.
General solicitation, or promotional advertising, is permitted.
Purchasers in a Rule 506(c) offering receive “restricted securities.”
Who is a Regulation D best suited for?
Companies can raise an unlimited amount.
Consumer centric products/services or understandable value proposition.
Companies with a Large & Active User Base
Things to consider:
Regulatory approval prior to closing investments will most likely take 2-3 months.
More investors (although this can also be a benefit as long as it’s managed appropriately). Crowd WallStreet can help assist with managing your investors on a cap table.
Legal and accounting fees can potentially be higher than under a traditional raise from accredited investors.
Tier II raises will be subject to ongoing public reporting. This can be a benefit for companies planning to exit through traditional IPO.
The company must be available to answer questions by prospective purchasers.
Reg S is a good compliment to Reg D, because Reg S allows non-U.S. investors to invest in a U.S. company or a non-U.S. company on a similar basis to the Reg D terms, but with no requirement to be accredited (wealthy) investors.
When submitting a Reg D offering, issuers need to submit:
PPM (Private Placement Memorandum)
This is something you can do yourself or hire a marketing agency who specialize in marketing private offerings.
The marketing consist of your offering pitch on Crowd WallStreet, video, PR, graphics, social media accounts, advertising.
In the case of a Reg D 506C offering, Crowd WallStreet will take reasonable steps to verify that investors are Accredited. We have a built-in solution for this in our platform.
Next, Crowd WallStreet will run an AML check on the investor.
The investor will receive the subscription agreement to sign it.
Next, the issuer company accepts investor and investor funds by countersigning the Subscription Agreement.
By filing Form D, a business has taken the time to show they're not providing an illegal public offering.
You must file Form D within 15 days of beginning to sell securities. Your first “sale” only occurs when an investor is completely under contract to provide funding.
This timeline refers to 15 business days. If your filing deadline expires on a holiday, Saturday or Sunday, you must have it in by the following business day.
If Reg D is right for you, apply today!