Reg A vs Reg D: key differences, investor access, and use cases

There are plenty of advantages for a company that qualifies for an SEC exemption. The business can potentially raise capital without the onerous and costly requirements of full registration.

‍These exemptions can be just as advantageous for investors as well. In certain scenarios, they are even open to non-accredited investors, democratizing access to the private market.

‍Here’s everything you need to know about Reg A vs Reg D exemptions before diving in.

The key differences between Reg A and Reg D come down to investor access, fundraising limits, marketing rules, disclosure, and resale flexibility. Both exemptions help private companies raise funds without a traditional registered public offering, but they serve different capital-raising needs.

For investors, the practical difference is access. Reg A allows companies to reach investors and the general public, while Reg D offerings are usually built around accredited investor networks, venture capital, and institutional capital.

For companies, the tradeoff is often speed versus reach. Reg D can be quicker and less costly. Reg A may take more preparation, but it can open a larger pool of potential investors and create more visibility in public markets.

Regulation A: The “mini-IPO” for private companies

Think of Reg A as a “mini IPO” for companies that aren’t going public. This exemption allows both accredited investors — financial institutions or high-net-worth individuals — and retail investors to purchase shares. Updates to the exemption in 2015 created two tiers under which private companies can sell their securities, each with its own particulars:

Tier 1

• Companies are allowed to offer up to $20 million within a 12-month period.
• Companies aren’t required to make continuous reports to the SEC. Instead, the issuing company must file an initial offering statement and final status report. The initial statement, however, must be qualified by state regulators.

Tier 2

• Companies are allowed to offer up to $75 million within a 12-month period.
• Companies must provide audited financial statements and continuous reports to the SEC, including the initial offering statement and final status report. However, these issuers don’t have to undergo additional qualifications with state regulators.
• Investing limits are imposed on non-accredited investors.

Tier 2 investor limits and reporting requirements for a Reg A offering

Tier 2 gives companies more room to raise funds than Tier 1. Tier 1 offerings are capped at 20 million in a 12-month period, while Tier 2 offerings can raise up to 75 million in a 12-month period.

That larger limit comes with added investor protections. In many Tier 2 offerings, non-accredited investors are limited in how much they can invest. The limit is generally tied to 10% of the greater of the investor’s annual income or net worth, depending on the investor and offering structure.

Reg A permits broader investor participation than Reg D, subject to the investment limits described above.

Tier 2 issuers also have ongoing reporting requirements after the offering. These may include annual reports, semi-annual reports, and current event updates. For investors, that added financial information can make Reg A more transparent than many Reg D private placements, even though Reg A issuers are not necessarily subject to the same reporting standards as companies listed on major public exchanges.

Reg A key features

• “Mini-IPO” enabling companies to raise up to $75 million/year.
• Open to accredited and non-accredited investors.
• Two tiers, differing by raise limit and SEC reporting requirements.

Pros and cons of Reg A for investors 

Reg A offerings enable a broad range of investors to access private companies. And varying transparency requirements provide those investors with more information to analyze. 

However, these early-stage investments may also carry a higher risk than public equities.

Regulation D: The go-to for accredited-only private rounds

Reg D offerings are subject to even fewer disclosure requirements with the SEC. This might be attractive for businesses poised for growth and looking to quickly raise capital, as the process is generally faster and cheaper than Reg A or a traditional IPO. 

Issuers under Reg D are required to submit Form D — a short document including basic contact information for the company and some details about its offering. The form isn’t subject to SEC review or qualification, however, meaning the company can immediately get to raising capital.

Reg D offerings also tend to carry more restrictions for investors than Reg A. Commonly-used rules 506(b) and 506(c) limit who can invest and restrict issued securities, potentially making them more difficult to liquidate. Additionally, Reg D is almost entirely limited to accredited investors, which describes individuals with a certain net worth or who meet specific professional criteria, as well as financial entities like banks and insurance companies. 

‍Accredited investors can use this access to get exposure to private companies much earlier in the funding cycle.

Here are the specifics prospective investors should know.

Reg D key features

• Commonly used by small startups and funds, as well as qualifying entrepreneurs.
• Primarily for accredited investors.
• Rule 506(b): Private solicitation is unlimited, and up to 35 qualifying non-accredited investors can also participate.
• Rule 506(c): Allows general solicitation, but only accredited investors can participate.

Pros and cons of Reg D for investors 

Reg D offerings provide investors access to private opportunities, which could offer growth potential depending on individual circumstances and market conditions. 

‍However, Reg D investments are typically less accessible and transparent for retail investors than Reg A offerings, while carrying similar risk profiles.

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The fundraising process looks different under Reg A and Reg D. Reg A is more public and more structured. Reg D is usually more private and faster to launch.

For investors, this matters because the process can shape how much information is available, who can participate, and how quickly an offering moves from planning to sale of securities.

Process for Reg A offerings

The process for Reg A offerings usually starts with the company preparing Form 1-A. This filing includes details about the business, risk factors, use of proceeds, management, and company’s financial information.

Before the company can sell securities under Reg A, it must file the offering statement with the SEC and wait for qualification. That is one reason Reg A requires more upfront preparation than Reg D.

Once qualified, a Reg A offering can be marketed more broadly. This can help companies raise funds from wider investor bases, including non-accredited investors who may not have access to many private-market opportunities.

Filing process for Reg D offerings

Reg D offerings usually move faster. In many cases, companies do not need SEC qualification before selling securities. Instead, they rely on a private offering exemption and file Form D with the SEC after the first sale.

That does not mean Reg D is free of compliance obligations. Companies still need to ensure compliance with federal securities laws, state securities notice filings, investor eligibility rules, and anti-fraud requirements.

For investors, the takeaway is simple: Reg D may be faster and less burdensome for issuers, but it is also typically limited to a narrower group of investors and may provide less public information than a Reg A offering.

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Marketing is one of the clearest differences between Reg A and Reg D. A Reg A offering can generally be promoted to the general public, which makes it more useful for companies seeking broader visibility.

Reg D depends on the rule used. Rule 506(b) offerings prohibit general solicitation, which means companies cannot publicly advertise the offering. These offerings are often shared through existing investor relationships, private networks, or intermediaries.

Rule 506(c), introduced under the JOBS Act, works differently. It allows general solicitation, but every purchaser must be an accredited investor and the issuer must take reasonable steps for verification.

Solicitation rules under Rule 506(b) and Rule 506(c)

Rule 506(b) allows companies to raise funds from an unlimited number of accredited investors and up to 35 non-accredited investors. However, because general solicitation is not allowed, these offerings are usually not visible to the broader market.

Rule 506(c) can be marketed publicly, but only accredited investors can purchase securities. This gives companies more flexibility to promote an offering, but it also narrows the final buyer base to verified accredited investors.

How solicitation affects investor bases

Solicitation rules affect who gets access. Reg A can reach the general public, which may create a larger pool of potential investors. Reg D is often more targeted, with access concentrated among accredited investors, venture capital firms, family offices, and other private-market participants.

For pre-IPO companies, that distinction can shape the entire capital-raising strategy. A company that wants public visibility may use Reg A. A company that wants to raise privately from a smaller investor base may use Reg D.

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Before sinking your money into a Reg A or Reg D offering, it is important to determine which option is best for your investment goals. 

Consider your risk tolerance and liquidity concerns. Some of these securities may come with long lock-up periods — Reg D securities typically can’t be resold to the public for the first six months to a year after purchase, for instance. Some investors choose to enter closer to announced exits, although liquidity timelines can vary significantly depending on when in a company's lifecycle an investor enters. That said, private secondary market platforms — including Augment — have created additional channels through which some investors seek to sell these securities, though liquidity is not guaranteed. 

Both Reg A and Reg D offerings come with opportunities and risks. Neither is inherently “better.” As always, investors considering these unique opportunities must be sure to align their strategy with their regulatory eligibility, risk appetite, and financial goals.

Sound equity management practices can help investors make the most of either path while reducing potential friction during liquidity events.

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