While looking for an
angel investor, you should keep in mind the rules governing
private placements of securities under Regulation D (commonly referred to as Reg D).
The SEC has promulgates several rules under Regulation D provide "safe harbors" to insure that a securities offering is exempt from registration under the Securities Act of 1933. Registration is both expensive and time consuming, which makes it completely impractical for an small offering.
Reg D provides three separate rules establishing exemptions from the securities registration requirement. These rules permit smaller businesses to sell their stock or other securities without being required to register those securities with the SEC:
- Rule 504 allows sales of securities up to $1,000,000.
- Rule 505 allows sales of securities up to $5 million
- Rule 506 puts no limit on the dollar amount of securities sold.
Companies taking advantage of a Reg D exemption are not required to register their securities and usually do not have to file reports with the SEC. However, they must file a "Form D" after they first sell their securities.
Form D is a brief report that gives the name and address of the company's executive officers and stock promoters but contains little other information about the company. It is therefore very simple to fill out and file a Form D.
David Staub
10-08-2012, 06:50 PM
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