Regulation S, Plain and Simple: How U.S. Sponsors Raise Capital Offshore for Syndications and Funds

TL;DR / Short Answer

• Reg S lets you sell securities to non‑U.S. persons outside the United States.
• You may solicit offshore investors even while a Rule 506(b) U.S. raise runs, if all solicitation happens offshore.
• Pair Reg S with Rule 506(b) or Rule 506(c); fence channels and keep records.

What is Regulation S?

Regulation S, or Reg S for short, is a set of federal securities laws issued by the Securities and Exchange Commission (SEC) that provides an exemption from the registration requirements for certain securities offerings made outside the United States. This regulation is designed to help companies raise capital from foreign investors while still complying with SEC regulations. 

One of the key features of Reg S is that it applies to syndication offerings made outside the United States, regardless of the location of the issuer. This means that companies can raise capital from foreign investors without having to register the offering with the SEC. This can be a significant advantage for companies that are looking to raise capital from a global investor base.

Who Reg S fits and when to use it

Reg S shines when your likely investors live, work, and bank outside the U.S. It fits sponsors who already speak to global families, funds, and companies. It also fits sponsors who plan to build those relationships through roadshows, conferences, and partners overseas.

It is common in real estate syndications, private funds, and co‑GP deals. Many sponsors run Reg S next to a U.S. private placement. Here is the key point: even if you are running a Rule 506(b) raise (no general solicitation in the U.S.), you may still solicit offshore investors under Reg S – so long as all solicitation activity occurs offshore and is not U.S.-directed. Keep the channels clean and the records clear.

If you have a strong U.S. list, use Rule 506(b) to move quietly. If you need U.S. reach, use Rule 506(c) and verify U.S. accreditation. In both cases, Reg S lets you add non‑U.S. investors in parallel without U.S. marketing directed at them.

New to the bigger picture of how offerings fit together? See Syndications and Funds to understand how sponsors sequence deals across a year.

Who this especially fits

• Sponsors with non‑U.S. family office, fund, or corporate ties.
• Sponsors with introducers or media outside the U.S.
• U.S. assets with global demand, like industrial, student housing, or hospitality.
• Co‑GP teams where one partner brings a real offshore network.
• Fund‑of‑funds teams that pool non‑U.S. checks into U.S. deals.

When to reach for it

• You expect a meaningful share of capital from outside the U.S.
• Your best list is abroad and ready now.
• You want public U.S. marketing (Rule 506(c)) and still need non‑U.S. money.
• You want to shorten the raise by running U.S. and offshore paths in parallel.

What the rules mean in plain English

This section translates the key ideas without legal jargon. Use counsel to fit them to your facts.

“Non‑U.S. person”

The buyer must not be a “U.S. person” under U.S. rules. Think of people and entities based abroad. Collect documents to show non‑U.S. status.

“Offshore transaction”

The offer and sale must occur outside the U.S. Hold meetings, send materials, sign, and deliver outside the U.S. Host files and tools in a way that supports the offshore story. Keep simple logs.

No “U.S.-directed selling efforts”

Do not aim marketing for Reg S buyers at the U.S. If you also run a U.S. 506(b) private raise, you may solicit offshore investors for Reg S so long as every Reg S touchpoint is offshore. If you run 506(c) public ads in the U.S., fence those from your non‑U.S. audiences.

Distribution compliance period

After the sale, transfers back into the U.S. market are limited for a time. The length varies by who you are and what you sold. Use legends and transfer controls so nobody resells too soon. Plan for months, not days.

Pairing with Rule 506

You can pair Reg S with Rule 506(b) or Rule 506(c). That lets you reach U.S. investors and non‑U.S. investors in one raise. Keep channels clean, lists separate, and records thorough. Remember: with 506(b), offshore solicitation is allowed for Reg S if done entirely offshore.

Step-by-step: how to run a Reg S raise (sponsor’s view)

The best way to stay clean is to follow a simple, repeatable process. Train your whole team. Most problems come from one email, post, or call that crosses a line.

Checklist — Reg S execution

1. Choose your structure: Reg S alone or Reg S plus Rule 506(b)/(c).
2. Design a single subscription flow with branching attestations (U.S. vs. non‑U.S.) and auto‑applied legends.
3. Draft offering documents with proper legends and transfer language.
4. Stand up KYC/AML and source‑of‑funds checks for non‑U.S. buyers.
5. Build your offshore marketing plan. Keep Reg S outreach and meetings offshore.
6. Prepare data rooms and signing tools with access controls and audit trails.
7. Train the team on do‑not‑do items (no U.S.‑directed efforts for Reg S).
8. Launch outreach offshore; document every meeting, call, and message.
9. Collect subscriptions and funds; verify non‑U.S. status and identities.
10. Close, issue securities with legends, and update the cap table.
11. Enforce transfer limits during the distribution compliance period.
12. Archive proofs: where, when, who, and how each step happened offshore.

Money, timing, and structure

You do not need to guess. A little planning avoids delays and rework.

Timelines you can expect

Document preparation can range from 2 weeks (at my firm) to 2 months, depending on complexity, pairing, and what you already have. Once materials are ready, most sponsors reach first close in 6–12 weeks. If you add Rule 506(c) and run public U.S. marketing, build time for accreditation verification. If your Reg S path needs translations or cross‑border banking, add some cushion.

A practical way to plan the calendar:

• Documents: 2–8 weeks.
• Marketing launch to first commitments: 2–4 weeks.
• First close: 4–8 weeks after launch.
• Compliance period: starts at issuance; keep transfer controls on.

What to budget for (high level)

• Legal drafting and updates to fit Reg S and any Rule 506 pairing.
• KYC/AML tools and vendor fees.
• Identity and address proofs for investors.
• If using Rule 506(c), third‑party accreditation verification for U.S. buyers.
• Translations for marketing and documents, if needed.
• Payments, FX, and bank wire coordination.
• Post‑close tracking and transfer controls.

Comparison table — common paths and trade‑offs

Path	Who it fits	U.S. marketing allowed	Investor status	Verification	Transfer/legends	Typical timeline	Common pitfalls
Reg S only	Global raises with little U.S. demand	No (for Reg S buyers)	Non‑U.S. persons	KYC/AML + non‑U.S. proofs	Legends + compliance period	6–10 weeks to first close	U.S.‑directed materials slipping into offshore channels
Reg S + Rule 506(b)	Relationship‑driven U.S. lists + offshore investors	U.S.: no general solicitation; Offshore: solicitation allowed under Reg S	U.S.: accredited (some non‑accredited allowed); Non‑U.S.: non‑U.S. persons	U.S.: reasonable steps; Non‑U.S.: KYC/AML	Legends + compliance period	6–12 weeks	Mixing U.S. content with offshore outreach; poor list hygiene
Reg S + Rule 506(c)	Need public reach in U.S. + offshore	Yes, for U.S. side only	U.S.: accredited only; Non‑U.S.: non‑U.S. persons	U.S.: third‑party or robust verification; Non‑U.S.: KYC/AML	Legends + compliance period	8–14 weeks	U.S. ads seen by offshore list; unclear fences between paths

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Examples and mini-scenarios

These three short stories show how sponsors use Reg S in practice.

Example 1 — 180‑unit multifamily, $8M need, day‑63 first close

The asset was a 1980s garden community with light value‑add. Debt was sized, but equity was short. The sponsor had long U.S. relationships, so we opened a Rule 506(b) path and kept outreach private. In parallel, we ran a Reg S track for the Gulf—full solicitation offshore only.

We used a single subscription workflow. At the start, investors attested to U.S. or non‑U.S. status. The system applied legends and steps based on that answer. The sponsor flew to Dubai for three days, held meetings abroad, and followed up from abroad. U.S. investors filled $5 million. A Dubai family office wired $3 million under Reg S. Every Reg S step, signature, and call was offshore. First close hit on day 63.

Example 2 — $12M industrial, 506(c) + Reg S, speed over spectacle

The window was tight. We paired U.S. public marketing under 506(c) with a fenced Reg S push in Asia. Same data room, one subscription flow, branching attestations at the top. U.S. investors went through accreditation verification. Non‑U.S. investors completed KYC/AML and non‑U.S. status checks.

A Singapore‑based fund subscribed under Reg S, while over seventy U.S. investors verified and subscribed under 506(c). Channels stayed clean. Non‑U.S. audiences did not receive U.S. ads. First close landed in week 8. Legends and transfer controls held through the compliance period.

Example 3 — $20M closed‑end fund, staggered closes, global mix

The sponsor wanted steady buying power for small industrial. We used one core PPM and a brief Reg S supplement. Subscription was unified with branching attestations. The team ran three planned closes over six months. Offshore solicitation led the first close; U.S. relationships filled the second; both pools topped off the third.

The rules were simple and followed by everyone. Offshore outreach stayed offshore. U.S. outreach followed the chosen Rule 506 path. The result was $11 million from non‑U.S. investors and $9 million from U.S. investors, with clean records and quiet audits.

Risks, pitfalls, and how to stay compliant

Most errors come from sloppy process, not hard questions. Fix the process and your risk drops fast. Build controls that a new teammate can follow on day one.

The decision tree — picking and running your structure

• If your buyers are primarily non‑U.S. persons, then use Reg S as your base and keep all steps offshore.
• If you need public reach in the U.S., then add Rule 506(c) and verify accreditation for U.S. buyers.
• If your U.S. list is relationship‑driven and private, then pair with Rule 506(b) and avoid general solicitation in the U.S., while soliciting offshore under Reg S.
• If any outreach or page could be seen in the U.S., then treat it as U.S. marketing and fence it from the Reg S path.
• If transfers are likely soon after closing, then plan stronger controls and investor communications during the compliance period.

Common traps to avoid

• U.S.‑directed selling efforts: A single U.S. press hit or ad can taint your Reg D Rule 506(b) path.
• Finders inside the U.S.: Be careful with U.S. “introducers.” Their role can trigger other rules.
• Weak KYC/AML: Cross‑border wires often draw extra questions. Have proofs ready.
• Lax legends and transfer gates: If resale controls are weak, your compliance period can be breached.
• Poor list hygiene: Keep your 506(b) relationships, 506(c) public audience, and Reg S buyers in separate lanes.

FAQs

What exactly counts as an “offshore transaction”?

The key is where the offer and sale happen. Meetings, calls, signing, and delivery should occur outside the U.S. You should keep records that show location and steps.

Can my U.S. website mention the offering if I use Reg S?

You can run a U.S. path (like Rule 506(c)) while also selling offshore under Reg S. Keep the Reg S path free of U.S.‑directed marketing. Fence content and lists so non‑U.S. prospects are not targeted by U.S. ads.

May I solicit offshore investors while a 506(b) raise is open?

Yes. You may solicit offshore investors under Reg S while a 506(b) raise runs in the U.S., provided all Reg S solicitation occurs offshore and is not U.S.‑directed.

May I use U.S. finders to source non‑U.S. investors?

Exercise care. Paying U.S.‑based people for introductions can raise other issues. If you use introducers, define their role and records with care and keep the Reg S path offshore.

How do Reg S transfers work during the compliance period?

Securities carry legends and transfer limits for a set period after sale. You control resales with procedures and records. Plan for this at issuance, not when the first transfer request arrives.

Can I run Reg S and Rule 506 at the same time?

Yes. Many sponsors do. Keep channels clean and lists separate. Document who saw what, where, and when.

What KYC/AML documents should I collect from foreign investors?

Expect to collect identity, address, and source‑of‑funds proofs that match your risk program. For entities, collect beneficial owner information. Your bank will often require similar items.

Do I need separate PPMs for Reg S and Reg D?

Many sponsors use a single core PPM with country‑specific legends plus a short Reg S supplement. What matters is that each investor receives the right terms, legends, and procedures.

Glossary

Non‑U.S. person
A buyer who is not a U.S. person under U.S. rules. Proof is needed.

Offshore transaction
An offer and sale made outside the U.S. Keep records to show it.

U.S.‑directed selling efforts
Marketing aimed at the U.S. audience. Avoid this for Reg S buyers.

Distribution compliance period
Time after sale when transfers are limited. Plan controls and legends.

Legend
A notice on the security that explains transfer limits and timing.

Rule 506(b)
A private U.S. raise. No public ads. You may still solicit offshore for Reg S if all activity is offshore.

Rule 506(c)
Public ads allowed in the U.S. All investors must be accredited and verified.

KYC (Know Your Customer)
Identity checks on buyers. Standard in cross‑border deals.

AML (Anti‑Money Laundering)
Rules and checks to block illegal funds.

Source of funds
Proof of where the investor’s money came from.

Transfer controls
Steps that restrict resales until rules permit them.

For a fuller view of how Reg S fits with U.S. private offerings across a portfolio of deals, see Syndications and Funds.

Citations

• Regulation S — General Statement (Rule 901; 17 C.F.R. § 230.901)
  States that offers/sales outside the U.S. are not “within” Section 5 for this purpose.
  URL: https://www.law.cornell.edu/cfr/text/17/230.901
• Regulation S — Definitions (Rule 902; 17 C.F.R. § 230.902)
  Key terms, including “U.S. person,” “offshore transaction,” and “directed selling efforts.”
  URL: https://www.law.cornell.edu/cfr/text/17/230.902
• Regulation S — Issuer/Distributor Safe Harbor (Rule 903; 17 C.F.R. § 230.903)
  Conditions for offshore offers and sales by issuers, distributors, affiliates, or persons acting on their behalf.
  URL: https://www.law.cornell.edu/cfr/text/17/230.903
• Regulation S — Offshore Resales (Rule 904; 17 C.F.R. § 230.904)
  Safe harbor for offshore resales by persons other than the issuer/distributor and certain affiliates.
  URL: https://www.law.cornell.edu/cfr/text/17/230.904
• Regulation S — Resale Limitations (Rule 905; 17 C.F.R. § 230.905)
  Domestic‑issuer equity acquired under Reg S is deemed “restricted securities”; resale limits apply.
  URL: https://www.law.cornell.edu/cfr/text/17/230.905