6.2.1. Private Placements: Regulation D
Probably the most common method of issuing securities without going through the rigorous SEC registration process is through a private placement. A private placement is an offering of securities to a small group of selected investors. Private placements are subject to the provisions of the Securities Act of 1933, but if the offering meets certain conditions stated within the Act, the offering may be exempted from traditional requirements. For this reason, an exempt private placement is considered an exempt transaction.
Most private placements are issued under the set of rules stated in Regulation D of the Act. Under Regulation D, companies can offer securities to a limited group of individuals or institutions that meet certain requirements. Regulation D is open to both U.S. and foreign issuers and can be used for both equity and debt securities. Like many of the exemptions in this chapter, Regulation D has provisions excluding bad actors, which are issuers who have disqualified themselves through various types of misconduct.
To protect the public from private placement investments that have not gone through the traditional, rigorous SEC review, public advertising is generally not permitted for Regulation D offerings. Filers of private placements must electronically file a Form D within 15 days of first use.
Additionally, the SEC provides that offers and sales that are not made within six months before the start or six months after the completion of a specific Regulation D offering are not considered part of the same offering. Sales that do occur within that window are generally integrated with the offering if they are part of the same plan of financing, involve the same class of securities, and are made for the same general purpose.
Instead of an underwriter, an issuer conducting a private placement often employs a private placement agent, or just placement agent. Like an underwriter, a placement agent provides