Regulation D, or Reg D, refers to SEC rules that allow private companies and investment funds to raise capital without registering with the SEC, as long as they follow certain guidelines.

Reg D has become one of the most important tools for private-market investing in the United States.

The Purpose of Regulation D

Reg D offerings were designed to:

• help companies raise money efficiently

• allow flexibility in structuring private investments

• limit participation to investors who can handle higher-risk, less-liquid opportunities

Reg D offerings typically invest in:

• private companies

• private real estate deals

• private credit

• operating businesses

• energy projects

• private funds

• and many other private-market opportunities

 

Two Main Flavors: 506(b) and 506(c)

 

506(b) offerings allow:

• Accredited investors (primary participants)

• Up to 35 non-accredited but “sophisticated” investors

BUT with one important rule:
No general advertising allowed.
This means the sponsor must have a “pre-existing relationship” with investors or is able to establish one before making a recommendation. 

Benefits:

• Broader investor base

• Long-standing, trusted structure

• Familiar to advisors and institutions

Considerations:

• Investor access depends on relationships

• Verification of accreditation is investor self-attestation

• No public marketing

 

Rule 506(c) 

Created after the JOBS Act in 2012, 506(c) allows:

• General solicitation and advertising

• Only accredited investors to invest

• Mandatory verification of accreditation (e.g., tax returns, CPA letter)

This means sponsors can publicly showcase opportunities, as long as only accredited investors ultimately participate.

Benefits:

• More visibility

• Easier for investors to discover opportunities

• Faster fundraising for sponsors

Considerations:

• Only accredited investors allowed

• Investors must undergo accreditation verification

• More public scrutiny of offerings

 

Reg D offerings support:

• real estate development

• small business growth

• private loan origination

• private fund formation

• energy and infrastructure projects

It is one of the most commonly used exemptions in the entire U.S. capital markets.

 

Here are some risks and considerations investors should understand:

• Reg D investments are illiquid

• There is no public market to sell shares

• Offering quality varies widely

• Due diligence is essential

• Returns are not guaranteed

That said, many long-term investors view Reg D as a way to access opportunities that traditional markets can’t easily provide.