Section 202 of Regulation D outlines one of the specific exemptions, known as “Rule 202.” It provides an exemption under which an issuer can offer and sell securities to an unlimited number of accredited investors and up to 35 non-accredited investors. Accredited investors are typically individuals or entities with a high net worth or a significant level of financial sophistication, which makes them presumed to have the ability to bear the risks associated with private investments.
Here are some key points about Rule 202 under Regulation D:
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Accredited Investors:
The term “accredited investors” encompasses various categories, such as individuals with a certain income level (e.g., $200,000 annually for an individual or $300,000 for a couple) or a specified net worth (e.g., over $1 million, excluding the value of the primary residence). Additionally, certain entities like banks, investment companies, and employee benefit plans may also qualify as accredited investors.
Non-accredited Investors:
Rule 202 allows a limited number (up to 35) of non-accredited investors to participate in the offering. Non-accredited investors are typically individuals who do not meet the specific financial thresholds to be considered accredited investors.
Disclosure Requirements:
While Rule 202 allows for a more streamlined fundraising process compared to a registered offering, it does not eliminate all disclosure requirements. Issuers are still required to provide certain material information to all investors to ensure they have sufficient information to make informed investment decisions.
Restricted Securities:
Securities issued under Rule 202 are generally considered “restricted securities,” meaning they cannot be freely traded on the secondary market until certain holding periods have been met or unless they are subsequently registered with the SEC.
Filing Requirements:
Although issuers are not required to register the offering with the SEC, they may still be required to file a Form D with the SEC within 15 days of the first sale of securities. Form D provides basic information about the issuer, the offering, and the types of investors involved.
It’s important to note that regulations and rules can change over time, and new updates or revisions may have occurred after As per the latest information, Therefore, it’s essential to refer to the latest official sources, such as the SEC website or legal counsel, for the most up-to-date information on Regulation D and its specific sections.