What Are Exempt Offerings?

If you are starting a business in Florida, or if you have a company and want to offer and sell securities, you may be wondering if you will need to register with the U.S. Securities and Exchange Commission (SEC).

A variety of companies may be eligible for an exemption, and thus may be able to offer and sell securities without having to register with the SEC. Some of those exemptions were created by the Jumpstart Our Business Startups (JOBS) Act, which Obama signed into law back in 2012. Those newly added exemptions include general solicitation under Rule 506(c), Regulation Crowdfunding, and Regulation A. Other exemptions have existed for a significantly longer period of time. The following is designed to provide you with information about some of the most common exempt offerings according to the SEC.

Common Exempt Offerings and SEC Exemptions 

The SEC lists the following as the most frequently considered exemptions from SEC registration:

• Private placements (Rule 506(b)): Transactions that do not involve a public offering are exempt under Section 4(a)(2) of the Securities Act.
• General solicitation (Rule 506(c)): Issuers are permitted, without registering with the SEC, to “broadly solicit and generally advertise an offering” as long as all of the purchasers are accredited investors, the issuer verifies that the accredited investors actually have this status, and Regulation D conditions are satisfied.
• Limited offerings (Rule 504): Up to $5 million of securities within a 12-month period can be exempt when a company files a proper notice. A number of companies, however, cannot use the exemption under Rule 504.
• Filing a Form D notice: Companies that are exempt under Rule 504 or Rule 506 typically will file a notice of an exempt offering by using Form D.
• Regulation Crowdfunding: Companies that are eligible can offer and sell securities through equity crowdfunding, but they are limited to a total amount of $1.7 million in a 12-month period, in addition to other restrictions.
• Regulation A: This exemption allows for certain public offerings to be exempt from registration. With Regulation A, Tier 1 offerings cannot exceed $20 million in a 12-month period, and Tier 2 offerings cannot exceed $50 million in a 12-month period.
• Intrastate offerings: A company that is organized in the state where it is offering securities, carries out a significant amount of business in that state, and only makes offers and sales to residents of that state can be exempt here.
• Employee benefit plans: Certain types of securities that are sold to compensate employees, consultants, and advisors may be exempt here.

Contact a Florida Securities Attorney 

Determining whether your company qualifies for one of these exemptions, or for another type of exemption, is an issue you should discuss with a Florida securities attorney.

Exemptions can be complicated, and if you rely on an exemption when you do not actually qualify for it, the consequences are quite serious. Further, you should keep in mind that your company will need to comply with both federal law and with Florida state law. As such, in addition to determining exemptions under federal law, you should discuss Florida’s blue sky law with your attorney to ensure that you are in compliance. Contact a Florida securities lawyer at the Law Office of Clifford J. Hunt, P.A. to learn more about how we can assist you.

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