SEC Rules

New SEC Rule Will Offer Up to $60 Million

New SEC Rule to Reg. A Will Offer Up to $60 Million of Securities Annually

New amendments to Super Regulation A are being adopted by the Security and Exchange Commission, along with other new SEC rules and forms to implement Section 401 of the Jumpstart Our Business (JOBS) Act.

Section 401 of the JOBS Act also added Section 3(b)(2) to the Securities Act of 1993, which directions the Securities and Exchange Commission to adopt rules that exempt from the registration requirements of the Securities Act offerings of up to $60 million of securities annually.

The final new SEC rule of Super Regulation A include the following: issuer eligibility requirements, content and filing requirements for offering statements, along with ongoing reporting requirements for issuers in Regulation A offerings. These new SEC rules and form amendments will be effective as of June 19, 2015.

The U.S. Government Accountability office, or GAO, recently reviewed the SEC’s new rule on the amendments for small and additional issues exemptions under the Securities Act, also known as Regulation A. It found the following: the final rules adopt amendments to Regulation A and other rules and forms to implement section 401 of the JOBS Act; the final rules build on current Regulation A and preserve with some modifications, existing provisions regarding issuer eligibility, offering contents, testing the waters, and bad actor disqualifications; the final rules modernize the Regulation A filing process for all offerings, align practice in certain areas with prevailing practice for registered offerings, create additional flexibility for issuers in the offering process, and establish an ongoing reporting regime for certain Regulation A issuers; the rules contain certain additional requirements for Tier 2 offering (such as a requirement to include audited financial statements in the offering documents and to file annual, semiannual, and current reports with the SEC). The GAO also found that the SEC complied with applicable requirements in disseminating the rule.

In simpler terms, the proposed rules will create a two-tier system with easier requirements for small offerings (defined as up to $5 million annually) compared to stricter requirements for larger offerings (up to $60 million annually), while also modernizing the Regulation A filing process to be consistent with current practice for registered offerings. The key impact is that nonpublic issuers would be allowed to raise up to $60 million from non-accredited investors in a public offering. Regulation A offerings are public offerings with no prohibition on general solicitation and general advertising that are exempt from the filing requirements of the Securities Acts of 1933 and 1934. Currently, Regulation A permits unregistered public offerings of up to $5 million of securities in any 12-month period by non-SEC reporting U.S. and Canadian issuers. The Regulation A exemption requires issuers to file an offering statement, which is similar to abbreviated version of a prospectus in a registered offering, in paper format with the SEC.

For more information on Super Regulation A, or the new SEC rules, contact, Zachary O. Fallon, Special Counsel, Office of Small Business Policy, Division of Corporation Finance, at (202) 551-3460; or Shehzad K. Niazi, Special Counsel, Office of Rulemaking, Division of Corporation Finance at (202) 551-3430, U.S. Securities and Exchange Commission, 100 F Street, NE, Washington. DC 20549-628.

What Is An Accredited Investor?

At the most basic level, accredited investors are people and institutions that meet qualifications to invest in venture capital, private placements, hedge funds and private equity. By purchasing securities from a business, they give that business a better opportunity to expand its reach, develop new technology, and invest in other forms of growth. Ideally, accredited investors receive a portion of the company’s profits in return for purchasing securities.

Accredited investors, however, must meet at least one of several qualifications established by the Security Exchange Commission (SEC). The average person will not meet these qualifications. Individuals, families, and institutions that have significant assets are more likely to meet accreditation qualifications.

Qualifications for Accredited Investors

Companies that aren’t sure how to define accredited investor status should turn to Rule 501 of Regulation D. There are also some amendments in the Dodd-Frank Wall Street Reform and Consumer Protection Act that adjust the definition of what is an accredited investor. While the details can get somewhat complicated, most accredited investors fall into one of eight categories.

Some of the most popular types of accredited investors include:

  • Financial companies, such as banks, registered investment companies, small business investment companies, business development companies, and even insurance companies.
  • Employee benefit plans. There are a couple caveats to this type of accredited investor, though. Either the employee benefit plan must have over $5 million in assets, or it must be managed by a registered investment adviser, insurance company, or banking institution.
  • Corporations, partnerships, and charitable organizations that have over $5 million in assets.
  • Manage personnel of the company selling the securities, including the company’s director, executive officer, and general partners.
  • Any business exclusively owned by accredited investors.
  • A person with a net worth of $1 million or more. This can also include spouses with a combined net worth over $1 million or anyone with managed assets worth $1 million or more. Only natural persons can qualify. That means no organizations, including corporations, can qualify as this type of accredited investor.
  • A person who has earned at least $200,000 of income for the last two consecutive years. Spouses must earn a combined income of $300,000 or more. Organizations cannot qualify as this type of accredited investor.
  • A trust that includes assets of at least $5 million. The trust cannot be formed specifically to purchase securities from the company. It must exist independently.

These qualifications can seem a bit confusing to some. The simplest way to answer what is accredited investor qualifications is to state the minimum requirements. Individuals must either have $1 million or earn $200,000 per year. Organizations and trusts typically need to have at least $5 million in assets.

If someone doesn’t fit those requirements, it’s unlikely that they can qualify as accredited investors.

How Companies Can Benefit From Accredited Investors

Companies are required to verify that their accredited investors meet SEC qualifications. Companies that fail to verify accredit investor status can face serious penalties that may include jail time, fines, and losing licenses.

Considering the hassle of verification and the penalties for not following the rules, many companies might wonder whether they even need accredited investors, especially since Rule 506 of Regulation D lets companies recruit up to 35 non-accredited investors.

That might seem like a smart idea at first, but there are several reasons successful companies usually focus on accredited investors.

The primary reason is that companies have to disclose large amounts of information to non-accredited investors. In an attempt to protect inexperienced investors who might get duped by unscrupulous companies, the SEC requires companies to give non-accredited investors discloser documents that inform them of how securities work and the risks they face by purchasing them. Providing and explaining these documents to inexperienced investors can take more time than verifying an accredited investor. By only choosing accredited investors, businesses have to disclose far less information. That helps businesses save time.

Accredited investors are also likely to spend larger amounts of money. At the very least, an accredited investor has $1 million in assets. That gives companies an opportunity to sell large securities to the investor. By accessing that money, companies can accumulate the funds they need to expand their services, products, and stores.

Non-accredited investors, by definition, do not have $1 million. That means they can’t invest as much money. A business could simply sell more securities to a larger number of non-accredited investors, but this is a hassle that few owners or managers want to undertake. When it comes to increasing the business’s capital as quickly as possible, accredited investors offer advantages that non-accredited investors simply cannot.

Accredited Investors Have More Flexibility Than Non-Accredited Investors

From a financial perspective, accredited investors can offer more benefits to the companies they invest in. Since these individuals, families, and organizations have access to significant wealth, they may choose to purchase more securities from companies they believe will grow and produce healthy profits.

Accredited investors also have the opportunity to invest in securities that have not been officially registered with the SEC. As long as a company only sells securities to accredited investors, it does not need to disclose as much information to them. According to the SEC, accredited investors are presumably savvy enough to understand the risks of investing in companies, private funds, hedge funds, and similar opportunities. This lets accredited investors and the companies they invest in act more quickly.

Companies that meet certain specifics under Regulation D can also advertise directly to accredited investors without providing extensive disclosure forms. This helps businesses attract more money that can make them successful while earning profits that increase the wealth of investors.

Creating a Criteria That Regulates Securities and Accredited Investors

The SEC created investor accreditation under authority of the Securities Act of 1933, which was passed by the U.S. Congress after a stock market crash led to the Great Depression. By creating the SEC to oversee securities regulations, Congress hoped to avoid future economic depressions. The strategy has been largely effective, although the country’s economy has experienced several recessions since 1933, often after periods of deregulation that weaken the SEC’s ability to control the industry.

Regulation D, which details requirements for organizations that sell securities, includes several rules that protect potential investors while encouraging the industry to follow responsible guidelines. When creating Regulation D, lawmakers considered how much money investors needed to have before they were considered experienced investors. While having $1 million doesn’t qualify every person as an experienced investor, it does indicate that the investor is likely to have this experience. The Supreme Court of the United States upheld the perspective that investors with $1 million or more are probably sophisticated enough to choose their own investment strategies. Investors with $1 million can also absorb losses more easily than investors who have less money. The regulations remained untouched for over 80 years.

Regulation D was revised in April 2012, when President Obama signed the Jumpstart Our Business Startups Act (JOBS) into law. The JOBS Act relaxes some regulatory requirements so companies have more opportunities to sell securities to accredited and non-accredited investors. Since Regulation D sets different requirements for selling securities to accredited and non-accredited investors, though, many businesses find that it is easier to focus on accredited investors who have more money and require fewer disclosures.

According to Forbes contributor Devin Thorpe, the SEC may alter regulations in the near future to make crowdfunding a more attractive option for businesses and small investors. These changes would likely let people qualify as accredited investors according to how much education and experience they have in finance and related subjects. This would let people without $1 million or $200,000 per year incomes qualify as accredited investors who can make sophisticated decisions without requiring businesses to give disclose excessive information. In other words, the changes would let people become accredited according to skill rather than wealth.

Accredited investors are a real boon to companies that sell securities. Current regulations make it relatively easy for businesses to find investors who have enough assets to make a lasting difference in their success. Without accredited investors, it’s unlikely that today’s small to medium businesses could find the capital they need to expand operations or introduce new products and services to the world without jeopardizing their own financial stability. Of course, buying securities from companies with successful strategies also gives people an opportunity to make more money from their investments. If you need a list of accredited investors to expand your business or fund your private investment offering, contact us and we would be happy to build you a collection of qualified prospects.

Cold Calling Rules & Warnings from the SEC

If you are getting sales leads in order to call prospective investors for a private offering, you need to be aware of the cold calling rules and warnings published by the SEC.  Calling accredited investors can be an extremely effective way to generate interest in your private placement and to raise capital.  It does, however, come with risks because you need to follow the rules in order to avoid a fine.

Before you start dialing make sure that your list has been scrubbed against the National Do Not Call Registry. This is an important first step and some dialing programs will do this for you and connect the call upon a live answer.  If you are manually dialing make sure that you buy your sales leads from someone that scrubs them for you or create an account to check the DNC list yourself.

Here are additional cold calling rules you need to follow.

  • Call hours.  Only call between the hours of 8:00 AM and 9:00 PM.  Make sure that if you are calling in a different time zone that you don’t accidentally call outside of their hours.
  • Introduce yourself.  As soon as someone answers you need to give them your name, why you are calling, what company you are with, and either your address or telephone number.  The last part only applies if you are selling an investment.
  • Be truthful.  This goes without saying, but it is important that you are 100 percent truthful with your sales pitch.  Make sure it is in line with any offering documents that have been prepared.

If someone asks to be removed from your call list, you must comply immediately and make sure they are not called back.  It is important to have some sort of tracking system, especially if you have a team of people making calls.  Once someone asks to be removed you could be fined for calling back.

If an investor is excited and wants to participate in your private offering – great news!  Just make sure that they sign a written agreement before you take any funds.  You cannot obtain their bank account information over the phone and complete the transaction unless they have already given you written permission to complete the transaction and withdraw money from their bank account.

It is essential that, as a sales person, you comply with these cold calling rules.  Otherwise, you could put yourself at risk to have complaints filed with the SEC and FINRA.  This could have a negative consequence on your ability to raise money along with your overall reputation.

It is also important that when you are making calls to investors, you are calling accredited investors.  You are not allowed to solicit or advertise to non-accredited investors.  You can avoid this by purchasing your list from .  That way you are assured to have a solid list of prospective investors to call.

As you start reaching out to investors use a tracking system.  There are several software programs available and at minimum you can use an excel spreadsheet or upload a shared spreadsheet to Google docs.  You can effectively raise money for your private offering.  Follow the cold calling rules when you do.

JOBS Act & Accredited Investor Leads

Effect of JOBS Act on Demand for Accredited Investor Leads

What Will Be the Role of Accredited Investors in Private Investments?

As the different ramifications of the 2012 JOBS Act begin to sink in, some assumptions have been made regarding the future role of accredited investors with regard to private investments. The Act specifies rules that change Rule 506 of the Security and Exchange Commission’s Regulation D. Rule 506 provides a safe harbor for the offering and sale of certain private, unregistered securities. Previously, Rule 506 allowed unlimited private fundraising from an unlimited number of accredited investors – investors with $1 million in wealth or $200,000 income in each of the previous two years – and up to 35 non-accredited investors (assuming certain financial disclosures are met). The old Rule 506 also prohibited general solicitation or marketing of restricted securities to the public.

The new rules contained in the JOBS Act lifts the marketing prohibition on Rule 506 offerings. Rule 506, according to the SEC’s Division of Risk, Strategy and Financial Innovation, is already the most frequently used safe harbor rule within Reg D (the others being Rules 504 and 505), and this lifting of marketing restrictions will no doubt accelerate the move to Rule 506-based private placements. Some have speculated that the regulations will diminish the role of accredited investors in Rule 506 offerings because of the dropped ban on general advertising. However, this viewpoint overlooks the fact that fully 90 percent of Reg D offerings are composed entirely of accredited investors. In other words, most everyone who invests in a Reg D offering is accredited, and there is no reason to believe they will be crowded out in the future.

One reason why accredited investors will most likely continue to dominate the private placement market is that private companies prefer them:

  1. Accredited investors, who are by definition wealthy, can on average make larger purchases than can non-accredited ones.
  2. By favoring large investors, private firms can reduce the number of small investors, which means reducing the total number of investors.
  3. Reducing the number of different investors saves operational costs, increases privacy, and in general reduces the hassles of dealing with a lot of small investors.

Therefore, the demand for accredited investors is likely to remain robust even when the SEC roles out the final version of its new rules. is the industry leader in the sale of accredited investor lead lists and is looking forward to the continuing opportunity of providing clients with the highest quality lists that are DNC and state-law compliant.

Eric Bank

Private Placements

Private placement (private investment capital), are funds invested in a company from private investors in the form of stocks or bonds.  Private placement is a convenient way to gain capital.


  • Do not require the assistance of brokers or underwriters
  • Considerably less expensive and time consuming, than a public offering
  • Makes gaining capital possible for more risky ventures or start-up firms
  • Enables small business owners to hand0-pick investors with common interests
  • Common interest investors can use their experience to assist the venture in gaining success
  • In the United States, private placements do not have to be registered with the SEC


  • Suitable investors can be difficult to find, especially in multiple states
  • Privately placed securities are often sold way below their market value
  • Companies using a private placement may have to hand over more equity because of the greater risk being taken on by their investors.

There are rules and regulations about who can invest in a private placement, how much an investor can earn through a private placement, and in how many private placements an investor may be involved. These rules are specified in the 1933 Securities Act, Section 4(2) & Regulation D.

Section 4(2) exempts companies wishing to sell under $5 million in securities to a small number of accredited investors from registering with the SEC.  Businesses taking advantage of private placements are required to:

  • Only seek investments from current company managers or accredited investors who have a pre-existing relationship with the company
  • Provide potential investors with recent financial statements
  • Provide potential investors with a list of risk factors associated with the investment
  • Invite potential investors to inspect their facilities

Regulation D of the 1933 Securities act was adopted in 1982 and has been revised several times since then.  It consists of six rules (numbered 501 through 506).

Rule 501 – 503: Define an Accredited Investor, Explain the conditions of a private placement, and establish other conditions that apply throughout the bill.

Rule 504: provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $1,000,000 of their securities in any 12-month period.

Rule 505: allows some companies offering their securities to have those securities exempted from the registration requirements of the federal securities laws. To qualify for this exemption, a company:

  • Can only offer and sell up to $5 million of its securities in any 12-month period;
  • May sell to an unlimited number of “accredited investors” and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions;
  • Must inform purchasers that they receive “restricted” securities, meaning that the securities cannot be sold for six months or longer without registering them; and
  • Cannot use general solicitation or advertising to sell the securities.

Rule 506: is considered a “safe harbor” for the private offering exemption of Section 4(2) of the Securities Act. Companies using the Rule 506 exemption can raise an unlimited amount of money. A company can be assured it is within the Section 4(2) exemption by satisfying the following standards:

– The company cannot use general solicitation or advertising to market the securities;

– The company may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchases. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated—that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;

– Companies must decide what information to give to accredited investors, so long as it does not violate the anti-fraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well;

– The company must be available to answer questions by prospective purchasers;

– Financial statement requirements are the same as for Rule 505; and

– Purchasers receive “restricted” securities, meaning that the securities cannot be sold for at least a year without registering them.

At, we can provide leads to accredited investors, many who have a proven history of private placement investments.  Private placement is a very effective way to acquire the capital you need to start a company, but be sure to mind your P’s and Q’s so the end result is positive for everyone involved!