Quick Answer
The small-offering Reg D tier permits unregistered offerings up to
Quick Answer: The small-offering Reg D tier permits unregistered offerings up to $10 million in any 12-month period. It has no investor cap and no federal preemption, so blue-sky compliance is required in every state where the offering is sold. Mostly used for small, single-state, or intrastate-adjacent offerings.
0 million in any 12-month period. It has no investor cap and no federal preemption, so blue-sky compliance is required in every state where the offering is sold. Mostly used for small, single-state, or intrastate-adjacent offerings.The small-offering tier is the simpler of the two substantive Reg D rules. Its dollar cap is low and its state-law exposure is high, so it serves a narrower set of issuers than the workhorse private-placement safe harbor.
What Are the Small-Offering Tier Conditions?
| Element | Substance |
|---|---|
| Dollar cap | Up to $10 million in any 12-month period (raised from $5M) |
| Investor limits | No cap on number of investors; accredited or non-accredited |
| General solicitation | Generally prohibited; permitted only if the offering is registered under state law in a state requiring delivery of a substantive disclosure document, or sold under a state law exemption that permits general solicitation to accredited investors only |
| Information delivery | No federal information-delivery requirement (state requirements may apply) |
| Form D | Required (file within 15 days of first sale) |
| Securities character | Generally restricted securities (resale subject to the restricted-share resale safe harbor); NOT restricted in the same narrow circumstances where general solicitation is permitted (state-registered disclosure offerings and the equivalent multi-state case) |
| Bad-actor disqualification | Applies (the disqualification rule covers the small-offering tier, paralleling the workhorse safe harbor) |
| Federal preemption | NONE (small-offering tier securities are NOT "covered securities"; state blue-sky registration or exemption is required in every state where securities are offered or sold) |
| Issuer eligibility | NOT available to Exchange Act reporting companies, investment companies, blank-check companies, or bad actors |
Exam Tip: Gotchas
- The $10 million cap is current. Earlier exam materials may quote the old $5M figure. Match the current $10M rule, not legacy treatment.
- "Restricted securities" is the general rule, not an absolute one. The resale-limitation condition (and the general-solicitation ban) drop away together in the same narrow state-law circumstances, so a 504 offering made under a state-registered, disclosure-delivering exemption is NOT restricted.
Why Is Federal Preemption the Critical Difference?
The small-offering Reg D tier is NOT federally preempted. That single fact drives most of the practical decisions about whether to use it.
- The workhorse private-placement safe harbor produces securities that are "covered securities" preempted from state registration under the federal-preemption provision of the Securities Act of 1933. States can require notice filings and filing fees but cannot require substantive registration.
- The small-offering Reg D tier securities are NOT covered securities and are NOT preempted. State blue-sky law applies in full.
- In practice, the small-offering tier works best when the issuer sells in one or two states with workable state exemptions.
Think of it this way: the small-offering tier is the friendly local-bakery exemption. It works fine if the issuer is selling in one neighborhood (one state). It becomes administratively expensive the moment the issuer wants to sell across state lines, because every state's blue-sky regime activates independently.
Exam Tip: Gotchas
- The small-offering Reg D tier is NOT federally preempted. Issuers must clear blue-sky in every state, which is why the small-offering tier is mostly used for small, single-state, or intrastate-adjacent offerings. The workhorse private-placement safe harbor (covered securities under the federal-preemption provision) is preempted from state registration; only Form D filing fees and notice filings remain at the state level.
Who Cannot Use the Small-Offering Tier?
Several categories of issuers are disqualified:
- Exchange Act reporting companies (issuers already subject to 1934 Act reporting obligations)
- Investment companies (registered investment companies, BDCs)
- Blank-check companies (shell companies formed to acquire an undefined business)
- Bad actors (issuers and certain associated persons with disqualifying events under the bad-actor rule)
Exam Tip: Gotchas
- Blank-check companies and reporting companies are barred from the small-offering tier. A SPAC (Special Purpose Acquisition Company) is a blank-check company by structure. A NYSE-listed operating company is a reporting company. Neither can use this tier.
When Does the Small-Offering Tier Make Sense?
The small-offering Reg D tier is the right choice when:
- The offering is small (well under $10 million) and the cap does not constrain the deal
- The issuer sells in only one or two states with workable blue-sky exemptions
- The issuer needs to accept non-accredited investors but wants the simpler federal regime than the private Reg D safe harbor's information-delivery requirements
For anything resembling a multi-state institutional capital raise, the workhorse private-placement safe harbor is the default choice because of federal preemption.
What Should You Check on Exam Day?
- Lock in the current $10 million cap; do not accept an older exam-prep figure of $5 million.
- Flag "no federal preemption" as the small-offering tier's defining weakness whenever a question tests state-registration exposure.
- Rule out Exchange Act reporting companies, investment companies, and blank-check companies (including SPACs) from using this tier.
- Recognize that this tier accepts non-accredited investors with no federal information-delivery mandate, unlike the private Reg D safe harbor's trigger.