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Exempt issuers include:

• U.S. government
• Municipalities
• National and state banks (not bank holding companies)
• Building and loans and savings and loans (S&Ls)
• Charitable, religious, educational, and nonprofit associations
• Common carriers (e.g., railroad equipment trust certificates)

Exempt issues include:

1. Commercial paper, bankers’ acceptances, and other securities with maturities of 270 days or less.
2. Insurance policies and fixed annuity contracts (excluding variable annuities).

The two tiers are:

A company must meet one of the following criteria:

1. Receives at least 80% of its income in the state.
2. At least 80% of the issuer’s assets are located within the state.
3. At least 80% of the offering proceeds are used within the state.
4. The majority of the company’s employees work in the state.

Under Regulation D Rule 506(b), there can be no more than 35 nonaccredited investors in a private placement.

A private placement investor must sign a letter stating that they intend to hold the stock for investment purposes only, which is why private placement stock is also called lettered stock or legend stock.

The requirements are:

1. All purchasers must be accredited investors.
2. The business must take reasonable steps to verify that all purchasers are accredited, considering background and relevant facts.

The primary disclosure document for municipal securities is the official statement, which contains similar information to a prospectus.

The common term for the disclosure document for other types of exempt securities is the offering circular; sometimes it is referred to as a notice of sale.

The JOBS Act eased the requirements for small- and medium-sized companies to raise capital, allowing for two offering tiers under Regulation A, significantly increasing the capital that can be raised compared to previous limits.

For Tier 2 offerings, investors must be qualified and can limit their investment to a maximum of the greater of 10% of their net worth or 10% of their net income per offering.

Legend stock refers to private placement stock that bears a legend indicating that it cannot be transferred without registration or exemption, and it is associated with an investment letter signed by the investor.

Under Tier 1 of Regulation A, a company can raise up to $20 million in a 12-month period.

The cooling-off period is the time during which an underwriter may not finalize the sale of securities but can gather indications of interest, distribute red herrings, and perform due diligence.

The primary federal law regulating the initial sale of securities to the public is the Securities Act of 1933.

Securities sold under Rule 147 may not be resold to nonresidents of the state for six months after the initial purchase.

Accredited investors meet specific financial criteria set by the SEC, while nonaccredited investors do not. Under Regulation D Rule 506(b), there can be no more than 35 nonaccredited investors in a private placement.

Form D is required to be filed online by companies raising capital in a nonpublic offering that qualifies under Regulation D, detailing the offering and any amendments needed.

The investment letter serves to confirm that the investor intends to hold the stock for investment purposes only, which is a requirement for private placements.