Comparison of Securities Registrations versus Exemptions by Estimated Dollars Raised
A study performed in 2010 for the SEC Division of Risk, Strategy and Financial Innovation indicated that each year a very, very significant portion of the total of all capital raised in the United States is comprised of Regulation D securities offerings.
- reg D: 20,630
- Public equity: 942
- Public Debt: 1,445
- rule 144a: 388
- reg S: 294
- Other 4(a)(2): 648
- reg D: 29,269
- Public equity: 1,072
- Public Debt: 1,930
- rule 144a: 473
- reg S: 262
- Other 4(a)(2): 668
The SEC published this data in connection with recent amendments of disqualification provisions under Rule 506
The SEC wrote, in terms slightly generalized for this context "[As to most Form D Rule 506 filings]... we have no definitive information on the final amounts raised. Figure 2, below, illustrates that at the time of the initial Form D filing, only [a minority] of [the] offerings ... were completed relative to the total amount sought. Separately, [most Rule 506 issuers whose offerings are incomplete] state their total offering amount to be “Indefinite” in their Form D filings. As a result, the initial Form D filings of these [issuers] do not accurately reflect the total amount of securities offered or sold." [words added and omitted]
Regulation D offerings can be divided into financial fund offerings (private equity fund or hedge fund offerings) and other kinds of offerings, in which the issuer is a non-financial fund company. Even after subtracting from the above total the two-thirds portion that that hedge fund offerings and private equity fund offerings represent, the amount of Regulation D non-financial fund offerings is immensely larger than the entire public equity capital market and debt capital market combined.
Of all Regulation D offerings, Rule 506 offerings are the most common. One cause of such popularity among issuers and counsel is that Rule 506 securities offerings can be made in unlimited amounts, and only Rule 506 allows an unlimited offering amount under Regulation D. But even among smaller Regulation D offerings, Rule 506 is the dominant offering method. Almost 50% of all Rule 506 offerings by non‐funds from 2010 to 2012 were for $1 million or less and therefore may have qualified for the Rule 504 exemption based on offering size, but most of those issuers elected to claim the Rule 506 exemption. An additional 20% of offerings were for between $1 million and $5 million and therefore could have claimed a Rule 505 exemption based on offering size, but most of those claimed to rely on the Rule 506 exemption instead of the Rule 505 exemption. This evidence suggests that the Blue Sky law preemption feature (see NSMIA), which is unique to Rule 506 offerings, has greater value to issuers than any of the unique features of Rule 504 or Rule 505 offerings.