Quick Answer
The insignificant-deviations cure lets an issuer keep its small-offering or uncapped-safe-harbor exemption for a particular purchaser despite a technical compliance failure, if the failed condition wasn't meant to protect that purchaser, the failure was insignificant to the offering as a whole, and the issuer made a good-faith, reasonable attempt to comply. Three core failures can never qualify.
This cure exists because private placements are complex, multi-party transactions where a single administrative slip could otherwise sink an entire deal. It protects the offering from that kind of collateral damage, but only for failures that were genuinely minor and unintentional.
When Can an Issuer Keep Its Exemption Despite a Technical Failure?
An issuer keeps its exemption for a particular purchaser if it shows all three of the following:
- The failed condition was not meant to protect that particular purchaser.
- The failure was insignificant to the offering as a whole.
- The issuer made a good-faith, reasonable attempt to comply with all applicable terms and conditions.
Which Failures Can Never Be Cured as Insignificant?
Three failures can never be cured as "insignificant," no matter how minor the miss:
- The general solicitation ban
- The small-offering exemption's dollar-amount limit
- The no-solicitation private placement exemption's purchaser limit
What Does the Cure Not Do?
The cure saves the registration exemption for that purchaser. It does not wipe the failure away. Where an offering holds its exemption only because of this cure, the underlying failure to comply stays actionable by the SEC.
Exam Tip: Gotchas
- This cure protects a condition meant to safeguard an individual purchaser. It never cures a breach of the offering's core dollar limit, purchaser limit, or the general solicitation ban; those three failures are always treated as significant, no matter how minor the miss looks on the facts.
What Should You Check on Exam Day?
- Confirm all three conditions are required together: the failed term wasn't meant to protect that purchaser, the miss was insignificant to the offering as a whole, and the issuer made a good-faith, reasonable attempt to comply.
- Rule out this cure whenever the fact pattern involves the general solicitation ban, the small-offering exemption's dollar cap, or the purchaser limit; those three are always significant.
- Remember the cure runs purchaser-by-purchaser, not offering-wide.