In August, the Securities and Exchange Commission, through its Division of Economic Risk Analysis (DERA), released its most recent report regarding its market study of unregistered security offerings. This report provides for an analysis of the total amount of capital raised via unregistered securities offerings and details how much capital is attributable to each of the various exemptions to registration. This most recent update provides significant detail with regard to the amount of capital being raised in reliance on Regulation D and the “new” Rule 506(c) exemption which came into effect in 2013, the amended Regulation A which became effective in 2015, and the new Regulation Crowdfunding that came into effect in 2016. As the report points out (to little surprise), amounts raised via private placements have greatly increased since 2008.
According to the report, in 2017, there were 37,785 reported Regulation D offerings, which accounted for more than $1.8 trillion raised in new capital. This total amount raised through Regulation D offerings alone surpassed the total amount raised through registered securities offerings ($1.5 trillion). Additionally, Rules 506(b) and 506(c) accounted for 99.9 percent of the amounts reported through Regulation D from 2009-2017. However, since coming into effect, only 4 ppercent of the capital raised in Regulation D offerings came from offerings pursuant to Rule 506(c). Although Rule 506(c) eliminated the ban on general solicitation, the vast majority of Regulation D offerings are still made pursuant to 506(b).
As expected, this report highlights the importance of private placements as a significant source of financing in our economy.
If you have any questions about this post, please feel free to contact any of our attorneys below. Our securities team at McDonald Hopkins is experienced in private placements and can assist you in your capital raising efforts.