Every sale of a security must be registered or exempt. Private companies rely on a small set of exemptions with specific conditions.
The most used safe harbour permits unlimited raising from accredited investors, with a limited number of sophisticated non-accredited investors subject to information delivery requirements. General solicitation is prohibited.
The general solicitation alternative permits advertising, but every purchaser must be accredited and the issuer must take reasonable steps to verify accreditation — a documentation obligation beyond a self-certification.
Accredited investor definitions turn on income, net worth excluding the primary residence, professional certifications, and entity thresholds.
Bad actor disqualification applies to the issuer and to specified participants, and requires a diligence inquiry documented before the offering.
Filings. A notice filing with the federal regulator shortly after the first sale, and state notice filings with fees. Missing these is a common and curable defect.
Intrastate and crowdfunding exemptions exist with their own limits.
Consequences of failure. Rescission rights for purchasers, meaning the money must be returned with interest, and disclosure of the defect in any later financing or sale.
Anti-fraud provisions apply regardless of exemption.