SIE Ready🚀 Securities Offerings · Lesson 4 of 6 · 7 min
Private Placements, Reg A and Friends
🔐 A startup can raise $10 million without a public offering. The trick is in who buys and how the shares are offered.
💡 Key idea
506(b): 35 non-accredited, no advertising. 506(c): advertise, but every buyer accredited and verified. Reg A Tier 2 tops out at $75 million.
🧠 Why it matters
Here the TRANSACTION is exempt, not the security. REG D 506(b): unlimited amount, unlimited accredited investors plus up to 35 NON-ACCREDITED (but sophisticated) purchasers in any 90 days, NO general solicitation. 506(c): general solicitation allowed, but ALL buyers must be accredited and the issuer must take reasonable steps to verify. Form D is due within 15 days of the first sale; buyers get restricted securities. ACCREDITED individual: income over $200,000 (or $300,000 with spouse or partner) in each of the last 2 years with the same expected; or net worth over $1 million EXCLUDING primary residence; or holding a Series 7, 65 or 82 in good standing. REG A: Tier 1 up to $20M, Tier 2 up to $75M in 12 months. RULE 147/147A: intrastate offerings. RULE 144A: resales to QIBs. REG S: offers outside the U.S.
📈 In the real world
Ben earns $180,000; his spouse earns $140,000. Alone he misses the $200,000 test, but their joint $320,000 has topped $300,000 for two years, so together they qualify as accredited. Their $900,000 house does not count toward net worth either way.
📌 Takeaways
- Accredited: $200k/$300k income, $1M net worth ex-home, or Series 7/65/82
- 506(b) allows up to 35 non-accredited buyers; 506(c) allows advertising to accredited only
- Reg A: Tier 1 $20M, Tier 2 $75M; 147/147A intrastate; 144A sells to QIBs; Reg S is offshore
📖 Terms in this lesson
Regulation D: SEC exemptions for private placements; Rule 506(b) bars general solicitation, while 506(c) allows it if every buyer is a verified accredited investor.
Accredited investor: An investor meeting SEC tests such as $200,000 income ($300,000 with a spouse) or $1 million net worth excluding the primary residence.
Rule 144A: An SEC exemption for reselling restricted securities to qualified institutional buyers (QIBs).
✅ Test yourself
Under Rule 506(b), a private placement may be sold to how many non-accredited purchasers in a 90-day period?
- None
- Up to 100
- Up to 35
- Unlimited
Answer: C · Up to 35
506(b) permits up to 35 non-accredited, sophisticated purchasers plus unlimited accredited investors. Rule 506(c) is the version limited to accredited buyers only.
Which individual meets an accredited investor test?
- Married, joint income of $250,000 for 2 years
- Net worth of $1.2 million, of which $500,000 is home equity
- Single, earning $150,000 for each of the past 2 years
- Holds a Series 7 license in good standing
Answer: D · Holds a Series 7 license in good standing
Series 7, 65 and 82 holders in good standing qualify. The net worth excluding the home is only $700,000, $150,000 is under the $200,000 individual test, and $250,000 is under the $300,000 joint test.
The maximum a company may raise in a 12-month period under Regulation A Tier 2 is:
- $75 million
- $50 million
- $5 million
- $20 million
Answer: A · $75 million
Tier 2 allows up to $75 million in 12 months; Tier 1 allows $20 million. $5 million is the Regulation Crowdfunding limit.
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