Series 6

AAA

Marketing and Sales Presentations - Regulation A, D and Rule 147

Three important rules also exempt securities sold under special conditions. They are Regulation A, Regulation D and Rule 147.


Look Out!
Within the category of exempt securities, three important rules encompass particular cases. Rule 147 covers the exemption of intrastate offerings from registration under \'33; Regulation A covers small public offerings, again exempt under \'33; and Regulation D deals with private placements. These three categories of securities, along with US government and Federal agency issues, municipal state issues, insurance policies, including fixed annuity contracts, and commercial paper & banker acceptances, are EXEMPT from ACT of 1933 registration.



Exam Tips and Tricks!
Note: As of November 30th, 2005 the FINRA Test Series 6 Study Outline no longer includes Regulation A and Rule 147. This sections have remained purely for your interest.


Regulation A: Small Offerings
A Reg A offering is a new issue of $5 million or less offered during a 12-month period. While the company is exempt from SEC filing, it must file an offering statement with the SEC and an offering circular is given to prospective buyers of the issue. This regulation gives small issues the advantage of less time spent preparing paperwork and filing, as well as lower legal and filing fees.

Regulation D: Private Placements
When a company wants to save time and money, it can sell securities in a nonpublic offering, known as a private placement. Provided the following conditions are met, a private placement is exempted by SEC Regulation D:

  • The buyer is a sophisticated investor, experienced enough to evaluate the risks involved.
  • The buyer has access to the same financial information that is normally included in a prospectus.
  • The buyer does not intend to make a quick sale.
  • The issue is sold to no more than 35 non-accredited investors. Note that this 35-person exception does not apply to accredited investors. Accredited investors are defined as financial institutions, private business development companies, and large, tax-exempt plans; an accredited investor can also be a director, officer or partner of the issuing company, or anyone with a net worth of $1 million, or an individual whose gross income for each of the past two years was $200,000 or more (or $300,000 jointly with a spouse) and who has reasonable expectations of meeting that income level the following year.

Rule 147: Intrastate Offerings
Rule 147 is the exemption available to securities sold intrastate. That is, intrastate instruments of commerce may not be used to sell the offering. In order for an issuer to qualify for this exemption, it must meet the following requirements:

  • 100% of the purchasers are residents of the state.
  • 80% of the company's gross revenues are derived from operations in the state.
  • 80% of the company's assets are located in the state.
  • 80% of the offering proceeds will be used on facilities within the state.
Securities Registration
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