Raising Money for Your Business Under Regulations CF, D, and A+

At the Law Offices of R.P. Burrasca, we are highly experienced in assisting our clients to successfully complete their fundraisings under Regulation CF, Regulation D and Regulation A+ of the Federal securities laws. Additionally, we have an in-depth understanding of the complexities of both the federal and state securities law and are able to provide tailored solutions that meet our clients’ needs.

For Regulation CF, our team is well-versed in the specific requirements and exemptions pertinent to these small dollar transactions. In this regard, we have in-depth knowledge of the state and federal laws and regulations that affect the offering of securities under the Regulation CF exemption, as well as the rules of the SEC and FINRA pertaining to Reg. CF transactions (both agencies have jurisdiction over these small dollar fundraisings). We correctly advise clients in order to position them for successful crowdfunding raises in the future; this will enable them to complete these transactions in a timely and compliant manner.

For Regulation D, our team is knowledgeable about the nuances of the registration process and the exemption requirements. We are able to provide advice on the best structure for the transaction and the most efficient way to complete the offering. We have successfully assisted clients with a number of these Regulation D transactions, ensuring that all of the necessary steps are taken to ensure compliance.

Lastly, for Regulation A+, our team has deep experience in the technical aspects of the process and the rules that govern these type of transactions. Time and time again, we have demonstrated are expertise in developing creative solutions to the complex legal issues that arise under Regulation A+ and can provide guidance on the best approach to completing the offering.

Set forth below is a brief summary of the salient details of each of these different type of exempted transactions.

Regulation CF (Reg CF)

Regulation CF (Reg CF) is a regulatory framework promulgated by the U.S. Securities and Exchange Commission (SEC) as part of the Jumpstart Our Business Startups Act (JOBS Act) of 2012. The purpose of Reg CF is to provide a way for small businesses to access capital from a large number of smaller investors. It is sometimes referred to as “crowdfunding” or “equity crowdfunding.”

Under Reg CF, companies are able to offer and sell securities to the public through an online platform, or “funding portal,” registered with the SEC and the Financial Industry Regulatory Authority (FINRA). This allows companies to raise capital from a large number of individuals, rather than from venture capitalists or angel investors. The maximum amount of capital that can be raised under Reg CF is $5 million over a 12-month period. Companies must file a Form C with the SEC to provide financial and other information about the company and the offering, and the offering must be conducted through a registered broker-dealer or a funding portal.

Investors in a Reg CF offering are typically not accredited investors and, generally, may not invest more than $2,200 or 5% of their annual income or net worth, whichever is greater. Companies are also required to provide educational materials to potential investors, as well as disclose certain information about the offering and the company.

Regulation D (Reg D)

Regulation D (Reg D) is a set of SEC rules that allow companies to sell securities to accredited investors without registering with the SEC. The purpose of Reg D is to help companies raise capital from wealthy, sophisticated investors, rather than from the general public.

Under Reg D, companies may issue debt or equity securities, such as stocks or bonds, to accredited investors without registering the offering with the SEC. This allows companies to quickly and easily raise capital without having to go through the lengthy and expensive process of registering the offering with the SEC and going public through an IPO.

Accredited investors are individuals with a net worth of at least $1 million (not including their principal residence) or income of at least $200,000 in each of the last two years, or $300,000 when combined with a spouse. These investors are considered to be sophisticated and able to fend for themselves and are therefore not subject to the same investor protections as the general public.

Reg D also allows companies to issue securities in private placements, which are exempt from registration. Companies may raise an unlimited amount of capital from accredited investors, but must provide certain disclosures to potential investors, including a private placement memorandum or a prospectus.

Regulation A+ (Reg A+)

Regulation A+ (Reg A+) is a regulatory framework promulgated by the SEC as part of the JOBS Act of 2012. Reg A+ allows companies to raise capital from both accredited and non-accredited investors without registering the offering with the SEC.

For a more detailed explanation of Reg A+, see our article describing this new form of “mini-IPO”, which you can read by clicking here.