[YouCanDoIt]

Hello
Was really confused on this topic. Below is what my understanding is:

Regulation A:
* Up to $50 million
* General Public placement allowed

Regulation D: (Is Reg. A different from D because Reg. A is open to GENERAL PUBLIC, and Reg. D is limited to PRIVATE? Or is it limited?)

* 504
– Up to $5 million/ annually
– Less than 12 months security
– Unlimited Accredited
– Unlimited Unaccredited
– Is general soliciting ALLOWED (???)

* 506
– Greater than $5 million (?) or could be ANY AMOUNT (?) or would having less than $5 put it under 504 I guess?
– Time period??
– Unlimited Accredited
– Up to 35 “sophisticated” unaccredited buyers
– NO GENERAL soliciting

Can you guys please give me your input , especially where I have ?-marked it. Thank you!!!

FAR: 76
REG: Currently studying
AUD:
BEC:

[DoubleBogey]

I think 506 is private placement: people who are rich enough that they're covered, so there's no limit. The $5 million limit is rule 505. 505 has the 35 unaccredited investors limit. And I believe that only 506 is general soliciting. This BLaw is rough.

[Anonymous]

Regulation D. This regulation is a combination of the private placement and small issue exemptions. Issuers must file Form D, which lists minimal information, with the SEC. Regulation D has three separate thresholds with differing requirements:

a. SEC Rule 504. This rule can only be used by companies not reporting to the SEC, usually closely held companies. No registration is required if no more than $5 million of securities are sold within a 12-month period with the following:
(1) No limit on the number of investors
(2) No general public offering or advertising
(3) No restrictions on resale by the investor
(4) If the securities are registered exclusively under a state blue-sky law that allows it, general solicitation and general advertising may be permitted. However, sales are allowed only to “accredited investors.”

b. SEC Rule 506. No registration of securities is required for a private placement of an unlimited amount of securities as follows:
(1) To any number of accredited investors
(2) To up to 35 unaccredited but sophisticated investors experienced in financial matters and able to evaluate risks involved in the investment
(3) With no general public offering or advertising
(4) Restricted resale by the investor
(5) Distribution of audited financial statements to nonaccredited investors
(6) Under Rule 506(c), a company may advertise the offering if:
(a) the investors are all accredited and
(b) the company has taken reasonable steps to verify its investors are accredited investors.
(7) Sales by dealers of securities that have been registered and issued:
(a) 90 days after offering to the public if the securities are the initial offering by the issuer or
(b) 40 days after offering to the public.

[Anonymous]

I hope they don't want us to know all these minor details for the exam. Seems like a petty thing to test on in the big picture

[YouCanDoIt]

THANK YOU SO MUCH! ESPECIALLY @ CPA_ME_23

Yes, it is a lot of detail, but I was getting them confused with each other, and little points of clarifications just kept annoying me. So having this list in front of me, really helps me separate the two, and when I see practice questions with these, I am not just trying to memorize the answer.

Also, most questions that I seen regarding these seem to deal with points #1- #4 under 504 and 506 , as listed by CPA_ME_23

@Jsdailey, when I studied with Beckers old material, they had listed rule 504, 505, 506, but now SEC has eliminated 505, so its: 504 & 506 only.

FAR: 76
REG: Currently studying
AUD:
BEC:

[DoubleBogey]

Ahhh thank you. I guess Wiley dropped the ball

[CS]

Ok so…

NINJA MCQ

Federal
Securities
Regulation,
Question
#:
385

Pix Corp. is making a $6 million stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933.

Which of the following provisions of the act would Pix have to comply with for the offering to be exempt?
Incorrect A. Regulation A
B. Regulation D, Rule 504
C. Regulation D, Rule 505
D. Regulation D, Rule 506

You answered A. The correct answer is D.

Rule 506 of Regulation D allows an exemption from registration under the Securities Act of 1933 for an offering of an unlimited amount of stock to an unlimited number of accredited investors and up to 35 other “sophisticated” buyers. The sale must be a private placement with no general public offering, and the shares are restricted as to resale by the investor.

Rule 504 has a $5 million limit. Regulation A limits its exemption to $1.5 million for a 12-month period offered by all selling security holders and a limit of $5 million offered by the corporation and shareholders. The $5 million includes all cash and other consideration received.

Rule 505 no longer exists; the SEC removed it in early 2017 from the regulations.

– I knew D was unlimited securities with the associated rules, but thought A was limited to $ 50 million and thought that's the answer they were looking for.

Ninja's answer key indicates that Regulation A is wrong because the limit is $ 5 million.

Regulation A limit is $ 50 million right??

[YouCanDoIt]

Regulation A is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period. For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.

Source: https://www.sec.gov/smallbusiness/exemptofferings/rega

So you're right, its either $20 million (tier 1) or $50 million (tier 2) with maximum of 12 months.

As for that question above, I think that question is OUTDATED. Because it still assumes REG. A is limited up to $5 million.

Reg. D would be RULE 504 (limit $5 million –> so choice B is out ), Choice C is out, because Rule 505 no longer exists, so
we are left with EITHER CHOICE A –or– D,

A- Reg A (max is $50 million, so $6 million qualifies)
D- Rule 506 (Unlimited $ amount)

Maybe if this question was updated, it would tell us whether it is a PRIVATE or PUBLIC placement ? Which would eliminate A, and leave us with D.

I might be off? But that's how I make sense of it.

FAR: 76
REG: Currently studying
AUD:
BEC:

[CS]

@ YouCanDoIt – Thanks for the clarification! I thought so but didn't want to fumble the details up more. Best of luck on your test score!

[Adam]

Highly unlikely you see more then one question on multiple tests of REG on this topic..

[Author]

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