Refer to the following Figure 8.5 to answer the questions that follow: Figure 8.5 Selected Limits and Other Characteristics by Type of SEC Registration Exemption SEC EXEMPTION AMOUNT OF OFFERING NUMBER OF INVESTORS QUALIFICATIONS OF INVESTORS Section 4a2 Section 4a5 No limit $5 million limit Small number No limit on number of accre dited investors No limit Must be sophisticated investors Must be accredited investors Reg D: Rule 504 No specific qualifications Reg D: Rule 505 $1 million limit (in a 12-month period $5 million limit lin a 12-month period No limit Reg D: Rule 506 35 unaccredited investors no limit on accredited investors 35 unaccredited investors no limit on accredited investors No limit No specific qualifications for unaccredited investors Unaccredited investors must have financial knowledge No specific qualifications Regulation A $5 million limit lin a 12-month period $50,000,000 limit lin a 12-month period No limit Section 3b)2 JOBS Act exemptions Only qualified buyers, if not listed on an exchange Answer: (A) ABC Inc. is planning to sell $4 million in securities. Management is trying to decide which, if any, securities laws must be complied with, if a private placement is used? (B) An offering that raises $2.5 million over a 12-month period, involving 35 unaccredited investors and 5 accredited investors, might be exempt from registration under (C) DEF Inc. raised $500,000 last year. The firm is now seeking additional financing capital from investors by issuing or selling "securities" in the form of stock in the firm. The firm is planning to obtain $750,000 as soon as possible from private investors. Describe how DEF could use Reg. D for issuing $750,000 in stock to private investors, that is, which rule(s) may apply, any restriction? Refer to the following Figure 8.5 to answer the questions that follow: Figure 8.5 Selected Limits and Other Characteristics by Type of SEC Registration Exemption SEC EXEMPTION AMOUNT OF OFFERING NUMBER OF INVESTORS QUALIFICATIONS OF INVESTORS Section 4a2 Section 4a5 No limit $5 million limit Small number No limit on number of accre dited investors No limit Must be sophisticated investors Must be accredited investors Reg D: Rule 504 No specific qualifications Reg D: Rule 505 $1 million limit (in a 12-month period $5 million limit lin a 12-month period No limit Reg D: Rule 506 35 unaccredited investors no limit on accredited investors 35 unaccredited investors no limit on accredited investors No limit No specific qualifications for unaccredited investors Unaccredited investors must have financial knowledge No specific qualifications Regulation A $5 million limit lin a 12-month period $50,000,000 limit lin a 12-month period No limit Section 3b)2 JOBS Act exemptions Only qualified buyers, if not listed on an exchange Answer: (A) ABC Inc. is planning to sell $4 million in securities. Management is trying to decide which, if any, securities laws must be complied with, if a private placement is used? (B) An offering that raises $2.5 million over a 12-month period, involving 35 unaccredited investors and 5 accredited investors, might be exempt from registration under (C) DEF Inc. raised $500,000 last year. The firm is now seeking additional financing capital from investors by issuing or selling "securities" in the form of stock in the firm. The firm is planning to obtain $750,000 as soon as possible from private investors. Describe how DEF could use Reg. D for issuing $750,000 in stock to private investors, that is, which rule(s) may apply, any restriction
