Exempt Transactions

US Securities Exempt Transactions

The exemptions fall into two classes. Transaction exemptions provide an exemption only from the registration provisions of Section 5 of the 1933 Securities Act. Securities placed under one of these exemptions remain subject to both the Securities Act and the Exchange Act and, importantly, cannot be resold unless either they are registered or another exemption is available. Exempt securities, on the other hand, need not be registered, but also may be resold free of registration burdens. Determining that a security is exempt, however, does not negate application of the securities acts in their entirety, for exempt securities remain subject to the antifraud provisions of the Securities Act and the Exchange Act.


The 2012 Jumpstart Our Business Startups Act (JOBS Act) expanded SEC exempting authority through a new Section 3(b)(2) directing SEC to develop a new exemption for offerings not exceeding an aggregate offering amount of 50 million.


Private Placement: Section 4(a)(2)



Regulation D

Regulation D provides three exemptions (Rule 504, 505 and 506) that taken together, cover the vast majority of offerings exempt from registration.

Rule 504
Maximum aggregate offering price of 1 million; not available for reporting companies or investment companies; no limitations on the number of purchasers; no affirmative disclosure obligations; resale of securities is restricted except under limited circumstances.

Rule 505
Maximum aggregate offering price of 5 million; no more than 35 purchasers; certain classes of individuals, including accredited investors; affirmative disclosure obligations applicable when there are non accredited investors; resale of securities is restricted.

Rule 506
No limitation on the maximum aggregate offering price; no more than 35 purchasers; certain classes of individuals, including accredited investors, not counted in computing the number of purchasers; affirmative disclosure obligations applicable when there are non accredited investors; non accredited investors and their representatives must meet sophistication standard; resale of securities is restricted; not subject to state regulation through registration.

The Safe Harbor

Crowdfunding Exemption: Section 4(a)(6)
The JOBS Act of 2012 includes an exemption named Section 4(a)(6) for so-called crowdfunding offerings, under which U.S. companies can raise money from public investors in securities offerings of $1 million or less.
Issuers are limited to $1 million in crowdfunding sales during any 12-month period. The issuer can receive the offering proceeds only when the amount raised equals or exceeds its stated target. Until then, investors can cancel their commitments to invest.
Crowdfunding intermediaries must register with the SEC either as securities brokers or as funding portals.


Employee Benefit Plans: Rule 701



Mini-Registration: Regulation A


Intrastate Offering Exemption: Section 3(a)(11)
According to §3(a)(11), the Securities Act exempts from registration purely intrastate offerings—that is, those by an in-state issuer to in-state residents. To temper the statutory exemption, the SEC has promulgated Rule 147 (amended in 2016) that creates bright-line standards defining (1) the scope of the offering, (2) whether the issuer and offerees are in-state, and (3) when out of state resales are permissible.

Intrastate Offerings: §3(a)(11) & Rule 147