Comparison Chart

Rule 506(b) offerings
(traditional Regulation D)
Regulation D New Rule 506(c) offerings Regulation CF
Section 4(a)(6) crowdfunding
Regulation A Tier 1 Regulation A Tier 2
Solicitation: Limited marketing directly to known investors without “general solicitation”; no internet solicitation (although online intermediaries may be used) No limitations on solicitation, can be marketed over the internet; TV, advertisements and solicitation on social media permitted Marketed over the internet, but primary solicitation and disclosure happens on “funding portal”; publicity anywhere else (including social media) is restricted Public offering; can be marketed anywhere Public offering; can be marketed anywhere
Eligible issuers: Both SEC registered and private companies can use exemption (U.S. and foreign) Both SEC-registered and private companies can use exemption (U.S. and foreign) Only U.S. companies not registered with the SEC can issue; no investment companies; restrictions on investment companies and blank check companies U.S. and Canadian; no SEC registered companies; no blank check companies; companies that have failed to make previous required filings excluded U.S. and Canadian; no SEC registered companies; no blank check companies; companies that have failed to make previous required filings excluded
Offering size: No dollar limit on offering size No dollar limit on offering size $1m limit on offering size but contemporaneous Rule 506 offerings permitted $20 million annual limit (can include $6 m by selling shareholders) $50 million annual limit (can include $15m by selling shareholders)
Eligible investors: Up to 35 non-accredited investors permitted; no limits on accredited investors Only accredited investors may buy No restrictions on type of investors but they must show they understand their investment and are limited in dollar amount All investors All investors
Ascertaining investors’ status: Accredited investors typically self-certify accredited status Issuers must take reasonable steps to “verify” accredited status; may use various methods; non-exclusive list of methods that may be relied on as meeting requirements Self-certification as to investment limits and whether those limits are reached Not required Self-certification as to investment limits, providing issuer has no knowledge to the contrary
Limits on investment amount: None None Annual limits: 5% of net worth or income below $100k; 10% above $100k; floor of $2k and ceiling of $100k None Limited to 10% of income or net worth per offering; no limit on accredited investors
Types of security: No limitations No limitations No limitations “Ordinary” debt and equity; no asset-backed securities “Ordinary” debt and equity; no asset-backed securities
Structure of investment: SPVs can be used as intermediary for holdings by accredited investors, but not non-accredited SPVs can be used as intermediary for holdings by accredited investors No SPVs allowed; all investors appear in cap table No SPVs allowed; all investors appear in cap table No SPVs a lowed; all investors appear in cap table
Disclosure: Private Placement Memorandum typically used although not required if all investors are accredited; online offerings typically more flexible Disclosure driven by market demands and liability concerns Disclosure (including reviewed or audited financial statements) mandated by statute and regulation Offering Circular containing mandated disclosure must be filed with SEC Offering Circular containing mandated disclosure must be filed with SEC
Use of offering materials outside mandated disclosure: Mandated disclosure only if nonaccredited investors involved (but same disclosure should be given to all investors) No mandated disclosure Can only use offering materials that are on platform and filed with SEC; no “test the waters” permitted although very limited notices of offering are allowed “Test the waters” material permitted; must be filed with SEC and must also comply with state requirements, which may require registration at state level prior to use “Test the waters” material permitted; all solicitation material must be filed with SEC
Financial statements: Financial statements required if non-accredited investors:
Offerings to $2m: audited balance sheet
Offerings to $7.5m: f/s for smaller reporting companies, audited unless unreasonable expense (in which case balance sheet must be audited)
Offerings above $7.5m: f/s mandated for reporting companies, audited unless unreasonable expense (in which case balance sheet must be audited)
Not required Offerings to $100k: self-certified f/s and issuer tax returns
Offerings to $500k or first-time offerings: CPA reviewed f/s
Offerings to $1m: CPA audited f/s
US GAAP financials required but need not be audited (under SEC requirements) unless already produced; many states require audited financials US GAAP audited financial statements
Filing Requirements: Form D (very short form with issuer and intermediary identity and offering description but no substantive disclosure) filed after offering starts Proposals by SEC would require earlier filing of Form D and additional amendment after closing; general solicitation materials proposed to be submitted informally to SEC Filing with SEC on Form C: XML-fillable form with attachments; all material on intermediary site must be filed Filing of Form 1-A with SEC: XML-fillable form with text file attachments Filing of Form 1-A with SEC: XML-fillable form with text file attachments
Review: No review by SEC No review by SEC No review by SEC; any marketing prior to SEC filing is prohibited SEC must review, comment and declare “qualified” before sale; state review also required SEC must review, comment and declare “qualified” before sale
Ongoing disclosure: None None Same information as in initial filing to be filed yearly Exit report required Annual, semi-annual and current reports required
State law: Registration preempted; notice filings permitted Registration preempted; notice filings permitted Registration preempted; notice filings permitted (no fees) State registration provisions apply State registration preempted; notice filing and fees permitted
Liability: Liability under general Section 17/Rule 10b-5 anti-fraud provisions for any person making untrue statements; state law liability; potential “willful” Liability under general Section 17/Rule 10b-5 anti-fraud provisions for any person making untrue statements; potential state law liability; potential “willful participant” liability for intermediary Rule 10b-5 liability plus new Section 4A(c) liability for issuer, its officers and directors and anyone “selling” (including promoting) the offering; state law liability; potential “willful participant” liability for intermediary Section 12(a)(2) liability (which extends to platforms); Section 17/10b-5 liability; state law liability; potential “willful participant” liability for intermediary Section 12(a)(2) liability (which extends to platforms); Section 17/10b-5 liability; state law liability; potential “willful participant” liability for intermediary
Resales: Securities are “restricted”; cannot be freely resold Securities are “restricted”; cannot be freely resold Very limited resales permitted for one year Freely tradable Freely tradable
Registration under 34 Act: Registration required if 2,000 holders of record of equity securities or 500 non-accredited holders Registration required if 2,000 holders of record of equity securities or 500 non-accredited holders 4(a)(6) securities not included in calculating 34 Act triggers; this exemption is conditional upon annual filings and not exceeding asset test Conditional exemption from 34 Act registrations for smaller companies if registered transfer agent used Conditional exemption from 34 Act registrations for smaller companies if registered transfer agent used
Intermediaries: Intermediaries not required; any intermediaries used must be registered broker dealers or entities exempt from B/D registration (such as VC Funds or bulletin boards) Intermediaries not required; any intermediaries used must be registered broker dealers or entities exempt from B/D registration (such as VC Funds or bulletin boards) Intermediaries are compulsory; can only be funding portals or broker dealers Intermediaries are not required; any intermediaries used must be registered broker dealers or entities exempt from B/D registration (such as VC Funds or bulletin boards) Intermediaries are not required; any intermediaries used must be registered broker dealers or entities exempt from B/D registration (such as VC Funds or bulletin boards)
“Bad Actor” rules: Offering cannot be made if “Bad Actor” involved; issuer must take “reasonable care” to exclude Bad Actors, may use questionnaires Offering cannot be made if “Bad Actor” involved; issuer must take “reasonable care” to exclude Bad Actors, may use questionnaires Offering cannot be made if “Bad Actor” involved; intermediaries must make background checks Offering cannot be made if “Bad Actor” involved; issuer must take “reasonable care” to exclude Bad Actors, may use questionnaires Offering cannot be made if “Bad Actor” involved; issuer must take “reasonable care” to exclude Bad Actors, may use questionnaires
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