Regulation D (Reg D)

Regulation D is a set of SEC rules that allow companies to raise capital by selling securities without registering them with the SEC, provided the offering meets specific exemption conditions. Most private real estate investments, including Delaware Statutory Trusts, private REITs, and Qualified Opportunity Funds, are sold under Regulation D, which is why they are limited to accredited investors and documented through a private placement memorandum rather than a public prospectus. The two most-used exemptions are Rule 506(b) and Rule 506(c). Under Rule 506(b), an issuer may raise an unlimited amount from an unlimited number of accredited investors plus up to 35 sophisticated non-accredited investors, but it may not engage in general solicitation or advertising, and it generally relies on investor self-certification of accredited status. Under Rule 506(c), the issuer may broadly advertise and solicit the offering publicly, but every investor must be accredited and the issuer must take reasonable steps to verify each investor's accredited status, typically by reviewing financial documents or a third-party letter. Securities sold under Regulation D are restricted and illiquid, and the issuer files a Form D notice with the SEC. Regulation D offerings are exempt from federal registration but remain subject to the antifraud provisions of the securities laws.