Federal Securities Law: Registration Requirement: Exemptions: Regulation D

Regulation D is an Important Exemption; Rule 506 Being Most Important of All

Because of financial imperatives for company formation, exemptions from Section 5, particularly Regulation D, are very important for capital formation in the United States.

A study was conducted in 2010 that showed Regulation D offerings leading all other kinds of offerings (Regulation 144A debt offerings) for largest total amount of capital raised in 2010.

  • Reg D offerings in the U.S. accounted for $905 billion of capital raised in 2010, with $863 billion reported in 2011 and $903 billion in 2012.
  • The median Reg D offering was modest in size: less than $2 million.
  • There were a large number of smaller offerings. 
  • There has been a shift from public to private capital raising, private issuances increased while public issuances decreased

Let's place Regulation D capital raising into better perspective as compared with the amount of capital raised by IPOs. 2014 IPOs, according to PwC’s Deals Practice, raised the highest proceeds for IPOs since 2000. And yet, the total capital raised from all IPOs in 2014 in the United States was only about $84 billion, which was much less than 10% of of the capital raised in Regulation D offerings in 2010, 2011 or 2012.

 Rule 506 accounts for 99% of amounts sold through Regulation D, indicating that issuers value the Blue Sky law preemption allowed under Rule 506 pursuant to NSMIA.

Table Comparing Rules 504, 505 and 506 of Regulation D