Exempt Transactions (1933 Act): Rapid Fire

The whole unit on one sheet: the exempt-transaction framework, Regulation D, the accredited investor, the resale safe harbors, and Regulation S.

Which One-Liners Win Points?

• The exemption is for the TRANSACTION, not the security. The same share is freely tradable in a registered IPO but "restricted" when sold in a private placement.
• The no-public-offering exemption is the STATUTORY private-placement exemption (the Ralston Purina facts-and-circumstances factors); Regulation D is the SAFE HARBOR under it, with four conditions: integration, information delivery, manner of offering, and resale limitations. The small-offering tier skips information delivery entirely.
• The accredited-only $5M exemption is separate, rarely used since the workhorse safe harbor has no cap. The small-offering Reg D tier has no investor cap but NO federal preemption (blue-sky required in every state) and bars reporting, investment, blank-check, and bad-actor companies.
• Form D is a NOTICE filing, not an approval, and its 15-day clock starts on the first SALE, not on closing.
• The verified-AI Reg D safe harbor permits general solicitation but needs VERIFICATION (not self-certification); once chosen, the issuer cannot later add non-accredited investors. The private Reg D safe harbor bans solicitation but allows up to 35 non-accredited sophisticated purchasers.
• Insiders are AUTOMATICALLY accredited regardless of wealth; so are holders of a Series 7, 65, or 82 license. Entity paths add institutions and $5M-asset/investment entities/family offices, none formed to acquire the securities.
• A QIB is a $100M discretionary SECURITIES threshold, not $100M assets under management; broker-dealers qualify at $10 million. General solicitation is permitted in OFFERS, but sales must go only to QIBs.
• The distribution compliance period is NOT a holding period; it restricts resales BACK INTO the U.S. Regulation S requires an offshore transaction AND no directed selling efforts in the U.S.
• Affiliate status hinges on CONTROL, not ownership percentage; officers and directors are presumed affiliates regardless of share count. A reporting-issuer non-affiliate holding 12+ months can resell FREELY with no conditions.
• The PPM is NOT a prospectus; it carries anti-fraud liability, not strict liability. The placement agent agreement is the BANKER's contract; the subscription agreement is the INVESTOR's.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

• The exemption attaches to the TRANSACTION, not the security; the character of the security itself does not change.
• Failing a Reg D condition does not automatically blow the underlying statutory exemption; it strips the safe harbor and forces a facts-and-circumstances defense. Regulation S works the same way.
• The 35 non-accredited limit is on PURCHASERS, not offerees, and one non-accredited purchaser triggers full information delivery to EVERYONE.
• The volume limit is the GREATER of 1% or 4-week average volume, not the lesser. Non-affiliates carry a much lighter burden than affiliates: no volume limit, manner of sale, or Form 144.
• Form 144 trigger is 5,000 shares OR $50,000, not "and."
• Banks need BOTH $100M discretionary securities AND $25M net worth to be a QIB; individuals never qualify.
• Category 3 (not Category 1) is the strictest Regulation S category.
• The 85% use-of-proceeds floor is calculated against GROSS proceeds and excludes offering costs, discounts, and commissions; it is a member-private-offering concept, not a third-party-participation one.
• Four resale paths exist: the restricted-share safe harbor, the QIB safe harbor, a registered resale (Form S-1 or S-3, expensive, names the affiliate), or the offshore resale safe harbor.

One-Breath Recap

The 1933 Act requires registration unless an exempt transaction applies, and the exemption attaches to the transaction, not the security, so an IPO share is restricted once sold privately. Issuers raise capital through the no-public-offering exemption, run by Regulation D (accredited investor tests, the 35 non-accredited cap, verified-AI verification, Form D within 15 days of first sale) or Regulation S offshore, where category number sets restriction intensity and the compliance period gates resales back into the U.S. rather than acting as a holding period. Holders get liquid through the restricted-share safe harbor, the QIB harbor (144A) at $100 million discretionary securities, or Regulation S; control persons use those same harbors or an expensive registered resale. The PPM anchors the document stack as anti-fraud, not strict-liability.

Need more than the recap? Read the full Exempt Transactions (1933 Act) unit.