Choosing between a US private placement under Section 4(a)(2) and Regulation D
Choosing between a US private placement under Section 4(a)(2) and Regulation D

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Choosing between a US private placement under Section 4(a)(2) and Regulation D
  • Registration
  • Using Regulation D
  • Using Securities Act, s 4(a)(2)

This Practice Note briefly examines the factors that an issuer and its legal counsel should consider when choosing whether to rely on either section 4(a)(2) of the US Securities Act 1933, as amended (Securities Act) or Regulation D. Produced in partnership with Patrick Simpson and John R. Thomas of Perkins Coie LLP.

The sale of securities, eg common or preferred stock, an LLC interest, or a limited partnership interest, or warrants or options to purchase any of the foregoing, is subject to regulation under both state and federal securities laws.

In general, any offer or sale of a security must be registered under federal securities laws and state Blue Sky laws unless there is an exemption from registration available. A transaction which is not done in compliance with securities laws can create significant liability for the participants in the transaction (the company, its officers and directors) and, potentially, lawyers and others who participate in the transaction.

In addition, whether or not a security is registered, it is a violation of the anti-fraud provisions of the securities laws to offer or sell a security unless the purchasers are advised of the material facts they need in order to make an informed investment decision.

Registration

Registration is a complex and time-consuming process that delays capital formation and involves significant transaction costs; the cost of