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Securities Alert

October 4, 2017

SEC Updates Rule 147 and Regulation D Compliance and Disclosure Interpretations

By Charles D. Vaughn, Mike Bradshaw, N. Vincent Pulignano III


On September 20, 2017, the SEC updated several Securities Act Rules Compliance and Disclosure Interpretations (C&DIs) to reflect recent amendments to Rule 147 and Rule 504, the repeal of Rule 505, and certain “non-substantive” changes.  In addition, the SEC withdrew some C&DIs regarding Regulation D, as they “do not directly relate to the Commission’s current rules.”

For our analysis on the modernization of Rule 147, the amendment of Rule 504 and the repeal of Rule 505, please see our previous Client Alerts published on April 17, 2017, December 1, 2016, and November 28, 2016.


The SEC provided the following new substantive guidance:

Rule 147 – Intrastate Offers and Sales

  • In the case of a family trust that is not deemed to be a separate legal entity and that has two trustees, only one of which resides the state of a Rule 147 offering, the issuer may offer and sell securities to the trust under Rule 147. (Question 541.03)

Rules 503 and 503T – Filing of Notice of Sales

  • A Rule 506 offering will not lose “covered security” status under Section 18 of the Securities Act of 1933 if the issuer fails to file a Form D with the SEC.  The SEC noted that a “covered security” includes any security issued in an offering exempt from registration under Section 4(a)(2) of the Securities Act.  After observing that Rule 506(b) was issued under Section 4(a)(2) and that the JOBS Act treats Rule 506(c) as a regulation issued under Section 4(a)(2), the SEC stated that “[f]iling a Form D is not a condition that must be met to qualify for the Rule 506 exemption.” (Question 257.08)

Rule 504 – Exemption for Limited Offerings and Sales of Securities Not Exceeding $5,000,000

  • Rule 504 is available to a private fund excluded from the definition of “investment company” by Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, as long as the Rule 504 offering is not a “public offering” as permitted under certain provisions of Rule 504.  A public offering would preclude the private fund from relying on the 3(c)(1) or 3(c)(7) exclusion, and if no other exemption is available, the fund would be an “investment company” and unable to use the Rule 504 exemption. (Question 258.03)
  • The instruction to paragraph (b)(2) of Rule 504 provides an example of the calculation of the aggregate offering price.  The example is intended to demonstrate the aggregate offering price limitation but does not contemplate whether the offerings it describes are integrated. (Question 258.05)
  • Rule 504 is not available to any issuer that is subject to bad actor disqualification under Rule 506(d) on or after January 20, 2017.  On or after that date, issuers must determine if they are subject to bad actor disqualification any time they offer or sell securities in reliance on Rule 504. (Question 258.06)

Other Updates

In addition, the SEC withdrew several Regulation D C&DIs that “do not directly relate to the Commission’s current rules.” Questions 258.04, 259.01 through 259.05, 260.02, 541.02, and 659.01 were removed. 

The SEC also made changes to other Rule 147 and Regulation D C&DIs to correct outdated rule and statutory references and to make other “non-substantive” changes.  Each of the C&DIs that were non-substantively changed is marked with an asterisk rather than a September 20, 2017 date.  

The complete set of Securities Act Rules C&DIs is available at: https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.

If you have questions regarding this publication, please call any of the lawyers listed below or your regular Nelson Mullins contact:
Jeff Allred: 404.322.6101 or at jeff.allred@nelsonmullins.com
Neil Grayson: 864.250.2235 or at neil.grayson@nelsonmullins.com
John Jennings: 864.250.2207 or at john.jennings@nelsonmullins.com
Janis Kerns: 202.712.2813 or janis.kerns@nelsonmullins.com
Daniel Nunn: 904.665.3601 or at daniel.nunn@nelsonmullins.com
Jim Rollins: 617.573.4722 or at james.rollins@nelsonmullins.com
Brennan Ryan: 404.322.6218 or at brennan.ryan@nelsonmullins.com
Douglas Spear: 404.322.6266 or at doug.spear@nelsonmullins.com
Jon Talcott: 202.712.2806 or at jon.talcott@nelsonmullins.com
Charles Vaughn: 404.322.6189 or at charles.vaughn@nelsonmullins.com