For those readers less familiar with the lingo, Regulation S was adopted by the Securities and Exchange Commission (SEC) as a safe harbor from the registration requirements of the Securities Act of 1933 for offshore offers and sales of securities.
Here is the question, our response and a practice tip.
May an issuer rely on Regulation S and D in one offering?
Yes. Regulation S may be relied upon for offers and sales outside the territory of the United States in a private placement even if coincident offers and sales are made in accordance with Regulation D. There is no exclusivity. Relying on both exemptions from registration is permissible. The legal authority is at Regulation D, Rule 500(g). This is codified at 17 CFR Section 230.500(g).
The primary benefit of Regulation S is that, when available to an issuer, eligible investors in an offering do not need to be accredited. Regulation S is an important feature of capital raises that rely on offshore financing precisely for this reason. As with all aspects of securities law and the EB-5 program, we could always see changes and it is important for issuers to continue to monitor developments in this area.
Securities counsel should be consulted before an issuer attempts to rely on any exemption from registration including Regulation S. While the parameters of compliance are beyond the scope of this short post, it is important to remember that safe harbors can disappear because of non-compliance.
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