Regulation D Rule 505

Regulation D Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period. Under this exemption, securities may be sold to an unlimited number of “accredited investors” and up to 35 “nonaccredited investors,” who do not need to satisfy the sophistication or wealth standards associated with other exemptions. Purchasers must buy for investment only, and not for resale. The issued securities are restricted, in that the investors may not sell their securities for at least six months, oftentimes up to two years, without registering the transaction. Any offering under Rule 505 should provide significant disclosures in the offering memorandum. Also, Rule 505 exemptions impose a level of financial reporting that Rule 504 companies do not have to meet. Note: the SEC has repealed Rule 505, to be effective on May 22, 2017. Please consult with an attorney.

Understanding Reg D Exemptions for Raising Capital

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