Intrastate Offering

In the United States, an intrastate offering is a securities offering that can only be purchased in the state in which it is being issued. Because the offering does not include more than one state, it does not fall under the jurisdiction of the Securities and Exchange Commission (SEC) and therefore does not need to be registered with the SEC. The offering does, however, fall under the jurisdiction of state regulators.

In order to be exempt from SEC regulations, intrastate offerings must meet the following requirements:

• it must be sold and offered only to residents of the state in which it is issued;
• the issuing company must be registered in that state;
• the company must do a significant amount of business in the state; and
• the resale of securities into other states cannot take place within six months of their initial sale.

Some companies choose this type of issue because it is less expensive than registering an offering with the SEC. There is no limit on the amount of money that a company can raise via intrastate offerings. Nor is there any limit on the size of the offering or the number of purchasers, so long as they are all residents of the state in which the issuing company is registered. In order to qualify for the exemption, the company must file Form D, Notice of Exempt Offering of Securities, with the SEC before they can offer intrastate securities.

Issuers of intrastate offerings must ensure that the buyers of their securities are residents of the state in which they are offering the securities in order to be exempt from SEC filing requirements. If even one out-of-state resident purchases a security in an intrastate offering, the issuing company may lose its exempt status.

A 2016 revision of the rules governing intrastate offering exemptions left the means for determining residency requirements largely up to the issuing companies. Previously, companies could rely on written representation from a purchaser regarding that purchaser’s residency status, and many companies still use the written representation rule to determine the residency status of purchasers. However, written representation of residency status may no longer be adequate for a company to determine whether or not a purchaser is eligible to participate in an intrastate offering. Some companies may choose to invoke additional methods of verifying a purchaser’s residency status.