USA Law and Practice Contributed by: D. Scott Bennett, Nicholas A. Dorsey, Virginia M. Anderson and Ellen H. Park, Cravath, Swaine & Moore LLP
7. Regulation 7.1 Securities Offerings
tain representations (eg, that it is an accredited investor) and (iii) the issuer does not have actual knowledge of any facts indicating that the pur - chaser’s representations were untrue, then the issuer can reasonably conclude that it has satis - fied the “reasonable steps” requirement. Com - panies that offer securities pursuant to Regu - lation D are required to file a Form D with the SEC within 15 days following the first sale. Form D requires information such as the identity of the issuer, the type of offering, the total offering amount and the exemption(s) being relied upon. Rule 701 under the Securities Act also provides a safe harbour from registration in the event that a private company grants equity securities to its employees pursuant to a benefit plan or other compensation agreement. To be able to rely on Rule 701, a company must itself grant the secu - rities to its employees and must not be subject to reporting requirements under US securities laws. 7.2 Restrictions CFIUS The Committee on Foreign Investment in the United States (CFIUS) is authorised to review certain transactions involving foreign invest - ment in the USA, so as to determine the effect of such transactions on US national security. If CFIUS identifies a risk to US national security arising from a transaction, it may negotiate or impose mitigation measures or – in rare cases – recommend that the US President prohibit the transaction. CFIUS has the authority to review: • any transaction that could result in a foreign person controlling a US business; • certain non-controlling but non-passive investments by foreign persons in US busi -
In the USA, all companies must comply with US securities laws. The Securities Act requires all securities offerings to be registered with the SEC unless there is an applicable exemption for such offering. One such exemption is Section 4(a)(2) of the Securities Act, which exempts the reg - istration of securities that will not be offered to the public (also known as “private placement” ). The exemption is intended to apply to sales to a limited number of sophisticated investors who are presumed able to fend for themselves. Regulation D was adopted under Section 4(a)(2) as a formal safe harbour from securities registra - tion. There are various rules under Regulation D that issuers may rely on for their private offer - ings, but the most commonly used exemption is Rule 506. Under Rule 506(b), companies can raise an unlimited amount of proceeds through sales to an unlimited number of accredited investors and up to 35 non-accredited inves - tors, so long as they do not make any general solicitations, advertise or market the sale of their securities. Rule 506(c) allows companies to advertise in connection with their securities offering, but requires the company to take rea - sonable steps to verify the accredited investor status of participating investors. In March 2025, the SEC issued a no-action letter and updated its Compliance and Disclosure Interpretations to provide guidance on the application of minimum investment amounts as a factor in determining whether an issuer has satisfied the requirement to “take reasonable steps” to verify a purchaser’s accredited investor status under Rule 506(c). Specifically, if (i) the purchaser agrees to make a minimum investment of USD200,000 (in the case of a natural person) or USD1 million (in the case of an entity), (ii) the purchaser provides cer -
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