BACKGROUND

Exempt placements are transactions involving the sale of securities that are not required to be registered with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. The act requires issuers of securities to provide investors with significant information regarding the securities being offered for public sale. This is typically achieved through a registration process with the SEC, which includes filing a prospectus containing detailed financial and operational information about the issuer.

Unlike registered offerings, which must adhere to strict regulatory requirements and disclosure obligations, exempt offerings are typically exempt from registration. This allows companies to raise capital more quickly and with fewer regulatory hurdles. Exempt offerings are generally targeted at a limited number of investors, often institutional investors or individuals with high net worth.

Some exempt offerings are sometimes referred to as private placements.

Exempt offerings rely on specific exemptions from registration provided by the SEC, primarily under the following regulation:

• Regulation A;
• Regulation D;
• Regulation Crowdfunding;

Certain securities offerings that are exempt from registration with the SEC may only be offered to persons who are “accredited investors.” An accredited investor is someone who meets certain income or net worth thresholds, for example, an individual having a net worth of over $1 million excluding primary residence or earning over $200,000 annually in each of the two most recent calendar years.

While not as stringent as those for public offerings, exempt offerings still require issuers to comply with certain regulatory requirements, including provision of sufficient information to investors.