Regulation D, Rule 506(b) Private Placements

The following provides a brief review of the SEC Rules defining the manner of offering private Securities to Accredited Investors

  • Regulation D was established by the SEC in the 1980’s to define, more specifically, a manner of privately offering Securities.  Most companies issuing private Securities do so by following one of the Rules within Regulation D.   
  • Rule 501 created the Accredited Investor definition for Investor eligibility for Rule 505 and Rule 506 Regulation D Private Placements. The Accredited Investor definition includes high net worth individuals whose income exceeds either $200,000/year (for single persons) or $300,000/year (for married couples) or a net worth exceeding $1,000,000 (excluding the value of their principal residence).  There are other definitions under Rule 501 which designate qualifying institutions or investment companies.
  • According to the SEC, “[Rule 506] is by far the most widely used Regulation D exemption, accounting for an estimated 90 to 95% of all Regulation D Offerings and the overwhelming majority of capital raised in transactions under Regulation D.”
  • Rule 506(b) of Regulation D enables Issuers to issue an unlimited amount of Securities so long as no more than 35 non-accredited Investors participate in the Offering.
  • Investors participating in a Rule 506(b) Private Placement must complete an “Accredited Investor Questionnaire” (see Accredited Investor Questionnaire).
  • IMPORTANTLY – All Accredited Investors participating in a 506(b) Private Placement may self-verify that they qualify as Accredited Investors
  • Virtually any type of Security can be offered to Investors through a Regulation D Private Placement including Promissory Notes or equity interests (e.g.  common stock, preferred stock or membership interest in a Limited Liability Company).
  • Regulation D Private Placements are subject to all other federal and state regulations regarding misrepresentation or fraud.
  • Form D must be filed with the SEC and in each state the Securities are sold under Regulation D within 15 days of the commencement of the Offering.

For more information about Private Placement regulations, please turn to “Regulation D, Rule 506(c) Private Placements.”





In the interest of accessibility, here are some terms that any investor should be familiary with.