Securities offerings

The 1933 Act requires any offer or sale of securities to be registered with the SEC unless an exemption from registration is available.  Registered investment companies register their securities for offer and sale to the public when registering as investment companies under the 1940 Act. Private funds typically avoid registration by ensuring that the offer and sale of their securities are conducted in such a manner as to qualify for the “private offering” exemption provided by Section 4(2) of the 1933 Act.

Section 4(2) of the 1933 Act exempts from registration “transactions by an issuer not involving any public offering.” As the determination of what constitutes a “public offering” involves the application of an imprecise and unpredictable facts and circumstances test, private funds typically seek to rely of the Regulation D safe harbor under Section 4(2).  An issuer that complies with all the relevant requirements of Regulation D will not be deemed to have engaged in a transaction involving a public offering.

In order to rely on Regulation D, an issuer must:

• sell securities only to “accredited investors”;
• not engage in any general solicitation or general advertising; and
• file a notice on Form D within 15 days of the first sale of securities in reliance on Regulation D.