The Differences Between RegD, RegCF, and Reg A+
- August 30, 2024
When it comes to raising capital, businesses have several options under the U.S. Securities and Exchange Commission (SEC) regulations. Each of these regulations—Reg D, Reg CF, and Reg A+—offers unique benefits and requirements. Here’s a comparative overview to help you understand which might be the best fit for your company.
Regulation D (Reg D)
Key Features:
- Investor Type: Primarily accredited investors. Under Rule 506(b), up to 35 non-accredited investors are allowed, provided they are “sophisticated” investors.
- Capital Raising Limit: No limit on the amount of capital that can be raised.
- General Solicitation: Prohibited under Rule 506(b), but allowed under Rule 506(c) provided all investors are verified as accredited (LenderKit) (SuccessGuaranteed).
- Filing Requirements: Must file Form D with the SEC after the first sale of securities.
Best For:
- Companies seeking large amounts of capital from accredited investors with fewer disclosure requirements compared to public offerings.
Regulation Crowdfunding (Reg CF)
Key Features:
- Investor Type: Both accredited and non-accredited investors.
- Capital Raising Limit: Up to $5 million in a 12-month period.
- General Solicitation: Allowed, but all transactions must occur through SEC-registered crowdfunding platforms.
- Filing Requirements: Must file Form C with the SEC, providing detailed disclosures about the company and the offering (LenderKit) (CrowdEngine) (SuccessGuaranteed).
Best For:
- Startups and small businesses looking to raise smaller amounts of capital from a broad investor base, including non-accredited investors.
Regulation A+ (Reg A+)
Key Features:
- Investor Type: Both accredited and non-accredited investors.
- Capital Raising Limit: Up to $75 million in a 12-month period (split into two tiers: Tier 1 up to $20 million, and Tier 2 up to $75 million).
- General Solicitation: Allowed, providing flexibility in how the offering is marketed.
- Filing Requirements: Must file Form 1-A with the SEC. Tier 2 requires ongoing reporting and audited financial statements (LenderKit) (SuccessGuaranteed) (DealMaker | Raise Capital Online).
Best For:
- Companies looking to raise substantial amounts of capital while reaching a wide audience, including retail investors, with fewer state-by-state registration requirements under Tier 2.
Choosing the Right Regulation
Choosing between Reg D, Reg CF, and Reg A+ depends on your company’s specific needs, the amount of capital required, the type of investors you want to attract, and the level of regulatory compliance you can manage. Each regulation has its own set of advantages and constraints, so it’s essential to carefully evaluate your business goals and consult with a securities attorney or a knowledgeable advisor.