Our Practice
Regulation A vs. Regulation D
Regulation A and Regulation D both permit eligible companies to raise capital without a traditional registered public offering. Regulation A uses an SEC qualification process and permits a broader public offering. Regulation D is generally used for private or limited offerings.
The choice affects who can invest, how the company can market the offering, what financial statements are required, what the company files afterward, and whether the shares can be resold. Capital Markets Law Group helps companies compare the two and select the exemption that fits the transaction.
How Do the Exemptions Compare?
Each exemption answers a different set of questions: who may buy, how the offering may be promoted, what the SEC reviews, and what happens after the closing. The table sets out the principal differences.
| Issue | Regulation A | Regulation D |
|---|---|---|
| SEC process | Form 1-A reviewed and qualified | No advance SEC qualification |
| Offering limits | Tier 1 up to $20 million and Tier 2 up to $75 million in any 12-month period | Rule 506 has no stated cap; Rule 504 caps offerings at $10 million |
| General advertising | Permitted subject to applicable rules | Prohibited under Rule 506(b); permitted under Rule 506(c) |
| Non-accredited investors | Permitted subject to applicable limits | Limited under 506(b); prohibited under 506(c) |
| Financial statements | Tier 2 requires audits | Depends on exemption and investors |
| Continuing reports | Tier 2 continuing reports | No Regulation D reporting regime |
| State registration | Relevant to Tier 1; generally preempted for covered Tier 2 offerings | Rule 506 provides substantial preemption subject to notices |
| Resale status | Generally not restricted solely because of Regulation A | Generally restricted |
The practical dividing line is audience and process. A company that wants public marketing and non-accredited investors accepts SEC qualification, audited financials for Tier 2, and ongoing reports. A company raising from a targeted investor group can move faster under Regulation D, but its investors generally hold restricted securities afterward.
When Might Regulation A Be Appropriate?
A company may consider Regulation A when it wants to:
- Reach a broad investor audience
- Accept non-accredited investors
- Conduct public marketing
- Raise substantial capital
- Offer securities not automatically restricted
- Build a larger shareholder base
When Might Regulation D Be Appropriate?
Regulation D may be suitable when the company wants to:
- Raise capital from a targeted investor group
- Avoid advance SEC qualification
- Negotiate directly with investors
- Use convertible or preferred securities
- Reduce initial complexity
- Close in one or more private transactions
Which Is Faster?
Regulation D can often be launched more quickly because it does not require advance SEC qualification.
Regulation A ordinarily requires Form 1-A, financial statements, SEC review, comments, and qualification before sales begin.
Which Costs Less?
Regulation D is usually less costly to prepare. Regulation A may be appropriate when broader marketing and investor participation justify the additional process.
How Does Capital Markets Law Group Help?
Our services may include:
- Comparing the exemptions against the company's goals
- Structuring the offering and securities
- Preparing offering documents
- Preparing Form 1-A or Form D filings
- Coordinating with auditors where required
- Preparing corporate approvals
- Responding to SEC comments
- Coordinating closings and post-offering compliance
Keep Reading: SEC Securities Offerings, Going Public and Form S-1 Registration Statements, Nasdaq and NYSE American Uplistings, Nasdaq Listing Applications and Uplisting Counsel.
Frequently Asked Questions
Can a Company Conduct Both?
Potentially. Integration, disclosure consistency, solicitation, investor eligibility, and use of proceeds must be considered.
Can Regulation D Be Advertised Online?
Rule 506(c) permits general solicitation if all purchasers are verified accredited investors. Rule 506(b) generally does not.
Is Regulation A a Miniature IPO?
It is sometimes described that way, but it is legally an exempt offering subject to SEC qualification.
Which Is Better for Non-Accredited Investors?
Regulation A generally provides the broader framework.
Are Regulation D Shares Freely Tradable?
Generally not. They are usually restricted securities.
How Large an Offering Can Each Exemption Support?
Regulation A permits offerings up to $20 million under Tier 1 and up to $75 million under Tier 2 in any 12-month period. Rule 506 has no stated dollar cap, and Rule 504 caps offerings at $10 million. The right comparison depends on the company's investor base as much as the ceiling: a larger limit is worth little if the audience cannot be reached lawfully.
What Ongoing Obligations Follow Each Exemption?
Tier 2 Regulation A issuers file annual, semiannual, and current reports on Forms 1-K, 1-SA, and 1-U. Regulation D has no equivalent reporting regime, but the issuer still files Form D, may make state notice filings, and remains subject to the antifraud laws. Obligations after the closing should be budgeted when the exemption is chosen.
Can the Company Switch from Regulation D to Regulation A?
Potentially, but the prior offering's communications, investor eligibility, integration questions, and disclosure consistency must be reviewed before the switch is made. An offering that has already been marketed privately may still be workable under Regulation A, but the review should come first.
Get Started
Talk to Capital Markets Law Group About Choosing an Exemption
Capital Markets Law Group helps companies compare Regulation A and Regulation D, select an appropriate exemption, prepare documents, and coordinate filings and closings. Contact the firm before marketing materials are drafted or investors are approached.