Regulation
D -- Rules Governing the Limited Offer and Sale of Securities Without
Registration Under the Securities Act of 1933
Regulation D --
Preliminary Notes
- The following rules relate to transactions
exempted from the registration requirements of section 5 of the
Securities Act of 1933 (the Act). Such transactions are not exempt from
the anti fraud, civil liability, or other provisions of the federal
securities laws. Issuers are reminded of their obligation to provide such
further material information, if any, as may be necessary to make the
information required under this regulation, in light of the circumstances
under which it is furnished, not misleading.
- Nothing in these rules obviates the need to
comply with any applicable state law relating to the offer and sale of
securities. Regulation D is intended to be a basic element in a uniform
system of Federal-State limited offering exemptions consistent with the
provisions of sections 18
and 19(c)of the
Act. In those states that have adopted Regulation D, or any version of
Regulation D, special attention should be directed to the applicable state
laws and regulations, including those relating to registration of person
who receive remuneration in connection with the offer and sale of
securities, to disqualification of issuers and other persons associated
with offerings based on state administrative orders or judgments, and to
requirements for filings of notices of sales.
- Attempted compliance with any rule in
Regulation D does not act as an exclusive election; the issuer can also
claim the availability of any other applicable exemption. For instance, an
issuer's failure to satisfy all the terms and conditions of Rule 506 shall
not raise any presumption that the exemption provided by section 4(2) of the
Act is not available.
- These rules are available only to the issuer of
the securities and not to any affiliate of that issuer or to any other
person for resales of the issuer's securities. The rules provide an
exemption only for the transactions in which the securities are offered or
sold by the issuer, not for the securities themselves.
- These rules may be used for business
combinations that involve sales by virtue of rule 145(a)
or otherwise.
- In view of the objectives of these rules and
the policies underlying the Act, regulation D is not available to any
issuer for any transaction or chain of transactions that, although in
technical compliance with these rules, is part of a plan or scheme to
evade the registration provisions of the Act. In such cases, registration
under the Act is required.
- Securities offered and sold outside the United
States in accordance with Regulation S need
not be registered under the Act. See Release No. 33-6863.Regulation S may
be relied upon for such offers and sales even if coincident offers and
sales are made in accordance with Regulation D inside the United States.
Thus, for example, persons who are offered and sold securities in
accordance with Regulation S would not be counted in the calculation of
the number of purchasers under Regulation D. Similarly, proceeds from such
sales would not be included in the aggregate offering price. The
provisions of this note, however, do not apply if the issuer elects to
rely solely on Regulation D for offers or sales to persons made outside
the United States.
Rule 501 --
Definitions and Terms Used in Regulation D
As used in Regulation D, the following terms shall have the meaning
indicated:
- Accredited investor. Accredited investor shall mean any person
who comes within any of the following categories, or who the issuer
reasonably believes comes within any of the following categories, at the
time of the sale of the securities to that person:
- Any bank as defined in section 3(a)(2)
of the Act, or any savings and loan association or other institution as
defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of
the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section 2(a)(48)
of that Act; any Small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, if
such plan has total assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement Income Security Act of
1974 if the investment decision is made by a plan fiduciary, as defined
in section 3(21)
of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors;
- Any private business development
company as defined in section
202(a)22 of the Investment Advisers Act of 1940;
- Any organization described in section 501(c)3 of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000;
- Any director, executive officer, or
general partner of the issuer of the securities being offered or sold, or
any director, executive officer, or general partner of a general partner
of that issuer;
- Any natural person whose individual net
worth, or joint net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000;
- Any natural person who had an
individual income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching the same
income level in the current year;
- Any trust, with total assets in excess
of $5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a sophisticated person
as described in Rule
506(b)(2)(ii) and
- Any entity in which all of the equity
owners are accredited investors.
- Affiliate. An affiliate of,
or person affiliated with, a specified person shall mean a person
that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person
specified.
- Aggregate offering price. Aggregate
offering price shall mean the sum of all cash, services, property, notes,
cancellation of debt, or other consideration to be received by an issuer
for issuance of its securities. Where securities are being offered for
both cash and non-cash consideration, the aggregate offering price shall
be based on the price at which the securities are offered for cash. Any
portion of the aggregate offering price attributable to cash received in a
foreign currency shall be translated into United States currency at the
currency exchange rate in effect at a reasonable time prior to or on the
date of the sale of the securities. If securities are not offered for
cash, the aggregate offering price shall be based on the value of the
consideration as established by bona fide sales of that consideration made
within a reasonable time, or, in the absence of sales, on the fair value
as determined by an accepted standard. Such valuations of non-cash
consideration must be reasonable at the time made.
- Business combination. Business
combination shall mean any transaction of the type specified in paragraph (a)
of Rule 145 under the Act and any transaction involving the acquisition by
one issuer, in exchange for all or a part of its own or its parent's
stock, of stock of another issuer if, immediately after the acquisition,
the acquiring issuer has control of the other issuer (whether or not it
had control before the acquisition).
- Calculation of number of purchasers. For purposes of
calculating the number of purchasers under Rule 505(b)
and Rule
506(b) only, the following shall apply:
- The following purchasers shall be
excluded:
- Any relative, spouse or relative of
the spouse of a purchaser who has the same principal residence as the
purchaser;
- Any trust or estate in which a
purchaser and any of the persons related to him as specified in
paragraph (e)1(i) or (e)1(iii) of this section collectively have more
than 50 percent of the beneficial interest (excluding contingent
interests);
- Any corporation or other organization
of which a purchaser and any of the persons related to him as specified
in paragraph (e)1(i) or (e)1(ii) of this section collectively are
beneficial owners of more than 50 percent of the equity securities
(excluding directors' qualifying shares) or equity interests; and
- Any accredited investor.
- A corporation, partnership or other
entity shall be counted as one purchaser. If, however, that entity is
organized for the specific purpose of acquiring the securities offered
and is not an accredited investor under paragraph (a)8 of this section,
then each beneficial owner of equity securities or equity interests in
the entity shall count as a separate purchaser for all provisions of
Regulation D, except to the extent provided in paragraph (e)1 of this
section.
- A non-contributory employee benefit
plan within the meaning of Title I of the Employee Retirement Income
Security Act of 1974 shall be counted as one purchaser where the trustee
makes all investment decisions for the plan.
- Executive officer. Executive
officer
shall mean the president, any vice president in charge of a principal
business unit, division or function (such as sales, administration
orfinance), any other officer who performs a policy making function, or
any other person who performs similar policy making functions for the
issuer. Executive officers of subsidiaries may be deemed executive
officers of the issuer if they perform such policy making functions for
the issuer.
- Issuer. The definition of the
term issuer in section
2(4) of the Act shall apply, except that in the case of a proceeding
under the Federal Bankruptcy Code (11 U.S.C. 101 et seq.), the
trustee or debtor in possession shall be considered the issuer in an
offering under a plan or reorganization, if the securities are to be
issued under the plan.
- Purchaser representative. Purchaser
representative shall mean any person who satisfies all of the following conditions
or who the issuer reasonably believes satisfies all of the following
conditions:
- Is not an affiliate, director, officer
or other employee of the issuer, or beneficial owner of 10 percent or
more of any class of the equity securities or 10 percent or more of the
equity interest in the issuer, except where the purchaser is:
- A relative of the purchaser
representative by blood, marriage or adoption and not more remote than a
first cousin;
- A trust or estate in which the
purchaser representative and any persons related to him as specified in
paragraph (h)1(i) or (h)1(iii) of this section collectively have more
than 50 percent of the beneficial interest (excluding contingent
interest) or of which the purchaser representative serves as trustee,
executor, or in any similar capacity; or
- A corporation or other organization of
which the purchaser representative and any persons related to him as
specified in paragraph (h)1(i) or (h)1(ii) of this section collectively
are the beneficial owners of more than 50 percent of the equity
securities (excluding directors' qualifying shares) or equity interests;
- Has such knowledge and experience in
financial and business matters that he is capable of evaluating, alone,
or together with other purchaser representatives of the purchaser, or
together with the purchaser, the merits and risks of the prospective
investment;
- Is acknowledged by the purchaser in
writing, during the course of the transaction, to be his purchaser
representative in connection with evaluating the merits and risks of the
prospective investment; and
- Discloses to the
purchaser in writing a reasonable time prior to the sale of securities to
that purchaser any material relationship between himself or his
affiliates and the issuer or its affiliates that then exists, that is
mutually understood to be contemplated, or that has existed at any time
during the previous two years, and any compensation received or to be
received as a result of such relationship.
Note 1: A person acting as a purchaser representative should consider the
applicability of the registration and antifraud provisions relating to
brokers and dealers under the Securities Exchange Act of 1934 (Exchange
Act) (15 U.S.C. 78a et seq., as amended) and relating to
investment advisers under the Investment Advisers Act of 1940.
Note 2: The acknowledgment required by paragraph (h)3 and the disclosure
required by paragraph (h)(4) of this section must be made with specific
reference to each prospective investment. Advance blanket acknowledgment,
such as for all securities transactions or all private
placements, is not sufficient.
Note 3: Disclosure of any material relationships between the purchaser
representative or his affiliates and the issuer or its affiliates does
not relieve the purchaser representative of his obligation to act in the
interest of the purchaser.
Rule 502 --
General Conditions to Be Met
The following conditions shall be applicable to offers and sales made under
Regulation D:
- Integration. All sales that are part
of the same Regulation D offering must meet all of the terms and
conditions of Regulation D. Offers and sales that are made more than six
months before the start of a Regulation D offering or are made more than
six months after completion of a Regulation D offering will not be considered
part of that Regulation D offering, so long as during those six month
periods there are no offers or sales of securities by or for the issuer
that are of the same or a similar class as those offered or sold under
Regulation D, other than those offers or sales of securities under an
employee benefit plan as defined in rule 405 under
the Act.
Note: The term offering is not defined in the Act or in Regulation
D. If the issuer offers or sells securities for which the safe harbor rule
in paragraph (a) of this Rule 502 is unavailable, the determination as to
whether separate sales of securities are part of the same offering (i.e.
are considered integrated) depends on the particular facts and circumstances.
Generally, transactions otherwise meeting the requirements of an exemption
will not be integrated with simultaneous offerings being made outside the
United States in compliance with Regulation S. See
Release No. 33-6863.
The following factors should be considered in determining whether offers
and sales should be integrated for purposes of the exemptions under
Regulation D:
- Whether the sales are part of a single
plan of financing;
- Whether the sales involve issuance of
the same class of securities;
- Whether the sales have been made at or
about the same time;
- Whether the same type of consideration
is being received; and
- Whether the sales are made for the same
general purpose.
- Information requirements-
1.
When information must be furnished. If the issuer sells securities under Rule 505 or Rule 506 to any
purchaser that is not an accredited investor, the issuer shall furnish the
information specified in paragraph (b)(2) of this section to such purchaser a
reasonable time prior to sale. The issuer is not required to furnish the
specified information to purchasers when it sells securities under Rule 504, or to any
accredited investor.
Note: When an issuer provides information to investors pursuant to paragraph
(b)1, it should consider providing such information to accredited investors as
well, in view of the anti-fraud provisions of the federal securities laws.
2.
Type of information to be furnished.
- If the issuer is not subject to the
reporting requirements of section 13 or 15(d) of the
Exchange Act, at a reasonable time prior to the sale of securities the
issuer shall furnish to the purchaser, to the extent material to an
understanding of the issuer, its business and the securities being
offered:
- Non-financial
statement information. If the issuer is eligible to use Regulation A,
the same kind of information as would be required in Part II
of Form 1-A. If the issuer is not eligible to use Regulation A, the
same kind of information as required in Part I of a registration
statement filed under the Securities Act on the form that the issuer
would be entitled to use.
- Financial statement
information.
- Offerings up to
$2,000,000. The information required in Item 310 of
Regulation S-B, except that only the issuer's balance sheet, which
shall be dated within 120 days of the start of the offering, must be
audited.
- Offerings up to
$7,500,000. The financial statement information required in Form SB-2.
If an issuer, other than a limited partnership, cannot obtain audited
financial statements without unreasonable effort or expense, then only
the issuer's balance sheet, which shall be dated within 120 days of
the start of the offering, must be audited. If the issuer is a limited
partnership and cannot obtain the required financial statements
without unreasonable effort or expense, it may furnish financial
statements that have been prepared on the basis of Federal income tax
requirements and examined and reported on in accordance with generally
accepted auditing standards by an independent public or certified
accountant.
- Offerings over
$7,500,000. The financial statement as would be required in a
registration statement filed under the Act on the form that the issuer
would be entitled to use. If an issuer, other than a limited
partnership, cannot obtain audited financial statements without
unreasonable effort or expense, then only the issuer's balance sheet,
which shall be dated within 120 days of the start of the offering,
must be audited. If the issuer is a limited partnership and cannot
obtain the required financial statements without unreasonable effort
or expense, it may furnish financial statements that have been
prepared on the basis of Federal income tax requirements and examined
and reported on in accordance with generally accepted auditing
standards by an independent public or certified accountant.
- If the issuer is a foreign private
issuer eligible to use Form 20-F,
the issuer shall disclose the same kind of information required to be
included in a registration statement filed under the Act on the form
that the issuer would be entitled to use. The financial statements need
be certified only to the extent required by paragraph (b)2(i) (B) (1),
(2) or (3) of this section, as appropriate.
- If the issuer is subject to the
reporting requirements of section 13 or 15(d) of the
Exchange Act, at a reasonable time prior to the sale of securities the
issuer shall furnish to the purchaser the information specified in
paragraph (b)2(ii)(A) or (B) of this section, and in either event the
information specified in paragraph (b)(2)(ii)(C) of this section:
- The issuer's annual report to
shareholders for the most recent fiscal year, if such annual report
meets the requirements of Rule 14a-3
or Rule14c-3
under the Exchange Act, the definitive proxy statement filed in
connection with that annual report, and, if requested by the purchaser
in writing, a copy of the issuer's most recent Form 10-K
and Form 10-KSB
under the Exchange Act.
- The information contained in an
annual report on Form 10-K or
10-KSB
under the Exchange Act or in a registration statement on Form S-1, SB-1, SB-2 or S-11 under
the Act or on Form
10 or Form
10-SB under the Exchange Act, whichever filing is the most recent
required to be filed.
- The information contained in any
reports or documents required to be filed by the issuer under sections 13(a), 14(a), 14(c), and 15(d) of the
Exchange Act since the distribution or filing of the report or
registration statement specified in paragraphs (b)2(ii) (A) or (B), and
a brief description of the securities being offered, the use of the
proceeds from the offering, and any material changes in the issuer's
affairs that are not disclosed in the documents furnished.
- If the issuer is a foreign private
issuer, the issuer may provide in lieu of the information specified in
paragraph (b)2(ii) (A) or (B) of this section, the information
contained in its most recent filing on Form 20-F or
Form F-1.
- Exhibits required to be filed with the
Commission as part of a registration statement or report, other than an
annual report to shareholders or parts of that report incorporated by
reference in a Form
10-K and Form
10-KSB report, need not be furnished to each purchaser that is not
an accredited investor if the contents of material exhibits are
identified and such exhibits are made available to a purchaser, upon his
written request, a reasonable time prior to his purchase.
- At a reasonable time prior to the sale
of securities to any purchaser that is not an accredited investor in a
transaction under Rule 505 or Rule 506, the
issuer shall furnish to the purchaser a brief description in writing of
any material written information concerning the offering that has been
provided by the issuer to any accredited investor but not previously
delivered to such unaccredited purchaser. The issuer shall furnish any
portion or all of this information to the purchaser, upon his written
request a reasonable time prior to his purchase.
- The issuer shall also make available
to each purchaser at a reasonable time prior to his purchase of
securities in a transaction under Rule 505 or Rule 506 the
opportunity to ask questions and receive answers concerning the terms
and conditions of the offering and to obtain any additional information
which the issuer possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information
furnished under paragraph (b)2(i) or (ii) of this section.
- For business combinations or exchange
offers, in addition to information required by Form S-4, the
issuer shall provide to each purchaser at the time the plan is submitted
to security holders, or, with an exchange, during the course of the
transaction and prior to sale, written information about any terms or
arrangements of the proposed transactions that are materially different
from those for all other security holders. For purposes of this
subsection, an issuer which is not subject to the reporting requirements
of section 13
or 15(d) of
the Exchange Act may satisfy the requirements of Part I.B.or C. of Form S-4 by
compliance with paragraph (b)2(i) of this Rule 502.
- At a reasonable time prior to the sale
of securities to any purchaser that is not an accredited investor in a
transaction under Rule 505 or Rule 506, the
issuer shall advise the purchaser of the limitations on resale in the
manner contained in paragraph (d)2 of this section. Such disclosure may
be contained in other materials required to be provided by this
paragraph.
- Limitation on manner of offering. Except as provided in Rule 504(b)(1),
neither the issuer nor any person acting on its behalf shall offer or sell
the securities by any form of general solicitation or general advertising,
including, but not limited to, the following:
0.
Any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio;
and
1.
Any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;
Provided, however, that publication by an issuer of a notice in
accordance with Rule
135c shall not be deemed to constitute general solicitation or general
advertising for purposes of this section; Provided further, that, if the
requirements of Rule 135e are satisfied, providing any journalist with access
to press conferences held outside of the United States, to meeting with issuer
or selling security holder representatives conducted outside of the United
States, or to written press-related materials released outside the United
States, at or in which a present or proposed offering of securities is
discussed, will not be deemed to constitute general solicitation or general
advertising for purposes of this section.
- Limitations on resale. Except as provided in Rule 504(b)(1),
securities acquired in a transaction under Regulation D shall have the
status of securities acquired in a transaction under section 4(2) of the
Act and cannot be resold without registration under the Act or an
exemption therefrom. The issuer shall exercise reasonable care to assure
that the purchasers of the securities are not underwriters within the
meaning of section
2(11) of the Act, which reasonable care may be demonstrated by the
following:
0.
Reasonable
inquiry to determine if the purchaser is acquiring the securities for himself
or for other persons;
1.
Written
disclosure to each purchaser prior to sale that the securities have not been
registered under the Act and, therefore, cannot be resold unless they are
registered under the Act or unless an exemption from registration is available;
and
2.
Placement
of a legend on the certificate or other document that evidences the securities
stating that the securities have not been registered under the Act and setting
forth or referring to the restrictions on transferability and sale of the
securities.
While taking these actions will establish the requisite reasonable care, it is
not the exclusive method to demonstrate such care. Other actions by the issuer
may satisfy this provision. In addition, Rule 502(b)2(vii) requires the
delivery of written disclosure of the limitations on resale to investors in
certain instances.
Rule 503 -- Filing
of Notice of Sales
- An issuer offering or selling securities in
reliance onRule
504, Rule
505 or Rule
506 shall file with the Commission five copies of a notice on Form D no later
than 15 days after the first sale of securities.
- One copy of every notice on Form D shall be
manually signed by a person duly authorized by the issuer.
- If sales are made under Rule 505, the
notice shall contain an undertaking by the issuer to furnish to the
Commission, upon the written request of its staff, the information
furnished by the issuer under Rule 502(b)
to any purchaser that is not an accredited investor.
- Amendments to notices filed under paragraph (a)
of this Rule 503 need only report the issuer's name and the information
required by Part C and any material change in the facts from those set
forth in Parts A and B.
- A notice on Form D shall be
considered filed with the Commission under paragraph (a) of this Rule 503:
- As of the date on which it is received
at the Commission's principal office in Washington, DC; or
- As of the date on
which the notice is mailed by means of United States registered or
certified mail to the Commission's principal office in Washington, DC, if
the notice is delivered to such office after the date on which it is
required to be filed.
Rule 504 -- Exemption
for Limited Offerings and Sales of Securities Not Exceeding $1,000,000
a.
Exemption. Offers and sales of securities that satisfy the conditions in
paragraph (b) of this Rule 504 by an issuer that is not:
- subject to the reporting requirements
of section 13 or
15(d) of the
Exchange Act,:
- an investment company; or
- a development stage company that either
has no specific business plan or purpose or has indicated that its
business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entity or person, shall be
exempt from the provision of section 5 of the Act
under section 3(b)
of the Act.
b.
Conditions to be met
- General conditions. To qualify for
exemption under this Rule 504, offers and sales must satisfy the terms
and conditions of Rule 501 and
Rule 502 (a),
(c) and (d), except
that the provisions of Rule 502 (c) and (d) will not apply to offers and
sales of securities under this Rule 504 that are made:
- Exclusively in one or more states that
provide for the registration of the securities, and require the public
filing and delivery to investors of a substantive disclosure document
before sale, and are made in accordance with those state provisions;
- In one or more states that have no
provision for the registration of the securities or the public filing or
delivery of a disclosure document before sale, if the securities have
been registered in at least one state that provides for such
registration, public filing and delivery before sale, offers and sales
are made in that state in accordance with such provisions, and the
disclosure document is delivered before sale to all purchasers
(including those in the states that have no such procedure); or
- Exclusively according to state law
exemptions from registration that permit general solicitation and
general advertising so long as sales are made only to "accredited
investors" as defined in Rule 501(a).
- The aggregate offering price for an
offering of securities under this Rule 504, as defined in Rule 501(c),
shall not exceed $1,000,000, less the aggregate offering price for all
securities sold within the twelve months before the start of and during
the offering of securities under this Rule 504, in reliance on any
exemption under section
3(b), or in violation of section 5(a) of
the Securities Act.
Note
1: The calculation of the aggregate offering price is illustrated as follows:
If an issuer sold $900,000 on June 1, 1987 under this Rule 504 and an
additional $4,100,000 on December 1, 1987 under Rule 505, the issuer
could not sell any of its securities under this Rule 504 until December 1,
1988. Until then the issuer must count the December 1, 1987 sale towards the
$1,000,000 limit within the preceding twelve months.
Note 2: If a transaction under Rule 504 fails to meet the limitation on the
aggregate offering price, it does not affect the availability of this Rule 504
for the other transactions considered in applying such limitation. For example,
if an issuer sold $1,000,000 worth of its securities on January 1, 1988 under
this Rule 504 and an additional $500,000 worth on July 1, 1988, this Rule 504
would not be available for the later sale, but would still be applicable to the
January 1, 1988 sale.
Rule 505 --
Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000
- Exemption. Offers and sales of
securities that satisfy the conditions in paragraph (b) of this section by
an issuer that is not an investment company shall be exempt from the
provisions of section
5 of the Act under section 3(b) of the
Act.
- Conditions to be met
- General conditions. To qualify for
exemption under this section, offers and sales must satisfy the terms and
conditions of Rule
501 and Rule
502.
- Specific conditions
- Limitation on
aggregate offering price. The aggregate offering price for an offering
of securities under this Rule 505, as defined in Rule 501(c),
shall not exceed $5,000,000, less the aggregate offering price for all
securities sold within the twelve months before the start of and during
the offering of securities under this Rule 505 in reliance on any
exemption under section
3(b) of the Act or in violation of section 5(a) of
the Act.
Note:
The calculation of the aggregate offering price is illustrated as follows:
Example 1. If an issuer sold $2,000,000 of its securities on June 1,
1982 under this Rule 505 and an additional $1,000,000 on September 1, 1982, the
issuer would be permitted to sell only $2,000,000 more under this Rule 505
until June 1, 1983. Until that date the issuer must count both prior sales
towards the $5,000,000 limit. However, if the issuer made its third sale on
June 1, 1983, the issuer could then sell $4,000,000 of its securities because
the June 1, 1982 sale would not be within the preceding twelve months.
Example 2. If an issuer sold $500,000 of its securities on June 1, 1982
under Rule 504
and an additional $4,500,000 on December 1, 1982 under this Rule 505, then the
issuer could not sell any of its securities under this Rule 505 until June 1,
1983. At that time it could sell an additional $500,000 of its securities.
- Limitation on number
of purchasers. There are no more than or the issuer
reasonably believes that there are no more than 35 purchasers of
securities from the issuer in any offering under this section.
Note:
See Rule 501(e)
for the calculation of the number of purchasers and Rule 502 (a) for
what may or may not constitute an offering under this section.
- Disqualifications. No exemption under
this section shall be available for the securities of any issuer
described in Rule
262 of Regulation A, except that for purposes of this section only:
- The term "filing of the offering
statement required by Rule 252"
as used in Rule
262(a), (b)
and (c)
shall mean the first sale of securities under this section;
- The term "underwriter" as
used in Rule
262 (b) and (c) shall
mean a person that has been or will be paid directly or indirectly
remuneration for solicitation of purchasers in connection with sales of
securities under this section; and
- Paragraph (b) (2)
(iii) of this Rule 505 shall not apply to any issuer if the Commission
determines, upon a showing of good cause, that it is not necessary
under the circumstances that the exemption be denied. Any such
determination shall be without prejudice to any other action by the
Commission in any other proceeding or matter with respect to the issuer
or any other person.
Rule 506 --
Exemption for Limited Offers and Sales without Regard to Dollar Amount of
Offering
- Exemption. Offers and sales of
securities by an issuer that satisfy the conditions in paragraph (b) of
this Rule 506 shall be deemed to be transactions not involving any public
offering within the meaning of section 4 (2) of
the Act.
- Conditions to be met-
- General conditions. To qualify for an
exemption under this section, offers and sales must satisfy all the terms
and conditions ofRule
501 and Rule
502.
- Specific Conditions-
- Limitation on number
of purchasers. There are no more than or the issuer reasonably believes that
there are no more than 35 purchasers of securities from the issuer in
any offering under this section.
Note:
See Rule 501(e) for
the calculation of the number of purchasers and Rule 502(a) for
what may or may not constitute an offering under this Rule 506.
- Nature of purchasers.
Each
purchaser who is not an accredited investor either alone or with his
purchaser representative(s) has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the prospective investment, or the issuer reasonably
believes immediately prior to making any sale that such purchaser comes
within this description.
Rule 507 --
Disqualifying Provision Relating to Exemptions Under Rule 504, Rule 505 and
Rule 506
- No exemption under Rule 504, Rule 505 or Rule 506 shall
be available for an issuer if such issuer, any of its predecessors or
affiliates have been subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily, preliminary or permanently
enjoining such person for failure to comply with Rule 503.
- Paragraph (a) of this section shall not apply
if the Commission determines, upon a showing of good cause, that it is not
necessary under the circumstances that the exemption be denied.
Rule 508 --
Insignificant Deviations from a Term, Condition or Requirement of Regulation D
- A failure to comply with a term, condition or
requirement of Rule
504, Rule
505 or Rule
506 will not result in the loss of the exemption from the requirements
of section 5 of the Act for any offer or sale to a particular individual
or entity, if the person relying on the exemption shows:
- The failure to comply did not pertain
to a term, condition or requirement directly intended to protect that
particular individual or entity; and
- The failure to comply was insignificant
with respect to the offering as a whole, provided that any failure to
comply with paragraph (c) of Rule 502, paragraph
(b)(2) of Rule 504, paragraph
(b)(2)(i) and paragraph(b)(2)(ii)
of Rule 505 and paragraph
(b)(2)(i) of Rule 506 shall be deemed to be significant to the
offering as a whole; and
- A good faith and reasonable attempt was
made to comply with all applicable terms, conditions and requirements of Rule 504, Rule 505 or Rule 506.
- A transaction made in reliance onRule 504, Rule 505 or Rule 506 shall
comply with all applicable terms, conditions and requirements of
Regulation D. Where an exemption is established only through reliance upon
paragraph (a) of this section, the failure to comply shall nonetheless be
actionable by the Commission under section 20 of the
Act.