Exempt offerings

Question 1

§3 of SA

Answer 1

exempts types of securities like us treasury bills

Question 2

§4

Answer 2

exempts txs

Question 3

§5

Answer 3

must be complied with if no exemption for security or tx, violation leads to recission under §12(a)(1)

Question 4

§4(a)(2)

Answer 4

The provisions of section 5 shall
not apply to –
(2) transactions by an issuer not
involving any public offering

Question 5

Rule 502(a)

Answer 5

integration 6-mo safe harbor

Question 6

Rule 502(b)

Answer 6

information. (2)(i) nonreporting companies (2)(ii) reporting companie

Question 7

Rule 502(c)

Answer 7

limit on manner of offering

Question 8

Rule 502(d)

Answer 8

resale restrictions

Question 9

Rule 504(b)(2)

Answer 9

limit on aggregate offering price to $1m.

Question 10

Rule 505(b)(2)(i)

Answer 10

• limited to aggregate offering price of $5m The aggregate offering price for an offering of
  securities under this rule 505, as defined in
  paragraph 501(c), shall not exceed
  $5,000,000, less the aggregate offering price
  for all securities sold within the twelve months
  before the start of and during the offering of
  securities under this section in reliance on any
  exemption under section 3(b) of the Act or in
  violation of section 5(a) of the Act.

Question 11

505(b)(2)(ii)

Answer 11

35 or fewer purchasers

Question 12

506(b)(2)(i)

Answer 12

35 or fewer purchasers

Question 13

506(b)(2)(ii)

Answer 13

sophistication for non-accredited purchasers

Question 14

501(a)

Answer 14

defintion of accredited investors. -501(a)(1) Banks, etc…
-501(a)(3) Entities
-501(a)(4) Dir, Officer…
-501(a)(5) Nat. Person
Wealth Test
-501(a)(6) Nat. Person
Income Test
Rule 501(f)
Executive
Officer

Question 15

501(i)

Answer 15

purchaser representative o If purchaser uses purchaser representative to meet the sophistication requirement, the representative:
• Rep must have knowledge and experience (must be sophisticated) R 501(i)(2)
• Cant be issuer’s director, officer, large block SH, affiliate R 501(i)(1)
• Unless representative is related to investor, no more distant than first cousin
• Relationship must be acknowledged in writing by purchaser R 501(i)(3)
• Purchaser rep must disclose any conflicts to purchaser R 501(i)(4) (for ex if rep is outside advisor

Question 16

501(e)

Answer 16

how to count no of investors
• Accredited purchasers excluded R 501(e)(1)(iv)
• Look through rule (count owners for SPVs created to circumvent rule) R 501(e)(2)
• Family Rule: any 2 persons in the same house who are related count for one investor 501(e)(1)(i)

Question 17

501(a)(5)

Answer 17

Any natural person whose individual net
worth, or joint net worth with that person’s spouse,
exceeds $1,000,000.
(i) Except as provided in paragraph (a)(5)(ii) of this
section, for purposes of calculating net worth under this
paragraph (a)(5):
(A) The person’s primary residence shall not be included
as an asset;
(B) Indebtedness that is secured by the person’s primary
residence, up to the estimated fair market value of the
primary residence at the time of the sale of securities,
shall not be included as a liability….
(C) Indebtedness that is secured by the person’s primary
residence in excess of the estimated fair market value of
the primary residence at the time of the sale of securities
shall be included as a liability

Question 18

501(f)

Answer 18

Executive officer shall mean the
president, any vice president in charge of
a principal business unit, division or
function (such as sales, administration or
finance), any other officer who performs a
policy making function, or any other
person who performs similar policy
making functions for the issuer. . .

Question 19

501(a)(6)

Answer 19

income threshold of 200k singly/ 300k jointly

Question 20

502(c)

Answer 20

[N]either the issuer nor any person acting on its
behalf shall offer or sell the securities by any form
of general solicitation or general advertising,
including, but not limited to, the following:
(1) Any advertisement, article, notice or other
communication published in any newspaper,
magazine, or similar media or broadcast over
television or radio; and
(2) Any seminar or meeting whose attendees have
been invited by any general solicitation or
general advertising;

Question 21

506(c)

Answer 21

Rule 506(c)
c. Conditions to be met in offerings not subject to limitation on
manner of offering
1. General conditions. To qualify for exemption under this
section, sales must satisfy all the terms and conditions of
Rules 501 and 502(a) and (d).
2. Specific conditions
i. Nature of purchasers. All purchasers of securities sold
in any offering under paragraph (c) of this section are
accredited investors.
ii. Verification of accredited investor status. The issuer
shall take reasonable steps to verify that purchasers of
securities sold in any offering under paragraph (c) of
this section are accredited investors. …
506(c)(2) tells you what is enough to do the due diligence. And can outsource the job.

Question 22

502(b)(1)

Answer 22

When information must be furnished. If the issuer
sells securities under Rule 505 or Rule 506 to
any purchaser that is not an accredited investor,
the issuer shall furnish the information specified
in paragraph (b)(2) of this section to such
purchaser a reasonable time prior to sale. The
issuer is not required to furnish the specified
information to purchasers when it sells securities
under Rule 504, or to any accredited investor.

Question 23

502(b)(2)(iv)

Answer 23

Brief description of info given to

Accredited Inv.

Question 24

Rule 502(b)(2)(v)

Answer 24

Questions and Answers

Question 25

502(a)

Answer 25

Offers and sales that are made more than six months
before the start of a Regulation D offering or are made
more than six months after completion of a Regulation D
offering
will not be considered part of that Regulation D offering,
so long as during those six month periods there are no
offers or sales of securities by or for the issuer that are of
the same or a similar class as those offered or sold under
Regulation D

Question 26

SEC Release No. 33-4552

Answer 26

(1) single plan of financing
(2) same class of securities
(3) same time period
(4) same type of consideration
(5) same general purpxose

Question 27

Rule 508

Answer 27

forgiveness. (a) A failure to comply with a term, condition or requirement of
Regulation D will not result in the loss of the exemption … if the
person relying on the exemption shows:
(1) The failure to comply did not pertain to a … requirement
directly intended to protect that particular individual … ; and
(2) The failure to comply was insignificant with respect to the
offering as a whole, provided that any failure to comply with
[Rule 502(c), Rule 504(b)(2), Rule 505(b)(2)(i) & (ii), or Rule
506(b)(2)(i)] shall be deemed to be significant to the offering
as a whole; and
(3) A good faith and reasonable attempt was made to comply
with all applicable … requirements …