Regulation D (aka Reg D) contains a set of rules that allows the leaders of many different kinds of businesses and industries sell securities without registering with the SEC.
In a nutshell, Regulation D offerings are securities regulated by the SEC which are formed by the Sponsor and sold to investors. They must also conform to state blue sky laws for each state where the investors are domiciled. Almost always, the Sponsor prepares and distributes a Regulation D private placement memorandum along with other syndication documents to investors prior to their investment.
Regulation D for Real Estate Syndications
Think of a real estate syndicate as a private company. When it comes to using Regulation D for real estate syndications a syndicator puts together an offer, they gather up a group of investors to invest in residential properties, apartments, office buildings, industrial buildings, retail properties, or land. They may have identified the properties (an identified offering) or be putting together a fund (also called a blind pool).
From an investor’s point of view, taking part in a real estate syndicate allows investors to join with experienced syndicators who have the expertise to make sound investments. It takes the issues of management off their plate. It also allows them to diversify because the investment amount can be much less as they are pooling their resources with other investors.
Reg D for Crypto
Reg D is often times used for raising capital for crypto-mining, blockchain businesses, or even crypto-funds. When using Regulation D for crypto, the Sponsor can create an offer which investors invest into and they can enjoy the possible upside of this new industry. The investment made by the investor may be in the form of dollars or in a cryptocurrency, but the asset itself cannot be distributed as a token as it would violate the limitations on resale.
Regulation D for Private Equity and Hedge Funds
Using Reg D to raise capital for private equity and hedge funds allow the business raise money from individual investors and institutional investors. While there are additional rules (e.g. the Investment Company Act) which also governs these, Regulation D is often a go-to for private equity and hedge funds.
Reg D for Business Capital Raises
The largest challenge many businesses face is raising capital. Whether it is for a new product / service line, a marketing campaign, new asset, or new location, Regulation D for business capital raises allows businesses to raise an unlimited amount of capital which can be structured as either equity or debt.