Raising capital online: Reg CF, Reg A+ and Reg D compared

Companies that sell securities in the United States must either register the offering with the SEC or fit an exemption. For small and growing businesses that want to raise money online, three exemptions come up most often: Regulation Crowdfunding (Reg CF), Regulation A (often called Reg A+) and Regulation D, chiefly its Rule 506. They differ in how much a company can raise, who can buy, whether it may advertise and what it must file afterward. This guide compares them at a general level and points to the official pages for the details.

In brief

Reg CF: up to $5 million in a 12-month period, sold online through a registered intermediary, open to the general public.
Reg A: Tier 1 up to $20 million and Tier 2 up to $75 million in a 12-month period, a public offering qualified by the SEC.
Rule 506 of Regulation D: no cap on the amount raised. Rule 506(b) bars general solicitation. Rule 506(c) permits it but requires every buyer to be a verified accredited investor.
Each route has different filing, disclosure and resale consequences.

The dollar figures above come from the SEC’s exempt offerings pages. Limits can be changed by rulemaking, so check the SEC and eCFR before planning an offering.

Why exemptions exist

The Securities Act of 1933 generally requires that securities offered to the public be registered with the SEC. Registration brings detailed disclosure and substantial cost, and it triggers ongoing reporting for many companies. The exemptions let issuers raise money with a lighter process, in exchange for limits on offering size, buyers or marketing, or for other conditions.

Regulation Crowdfunding

What it is. Reg CF allows offerings of up to $5 million, with securities sold online through a registered broker-dealer or a registered funding portal, according to the SEC.

Who can invest. The general public. Non-accredited individuals face limits on their total investment across all crowdfunding offerings in a 12-month period. The SEC’s page does not give the dollar amounts, so check Regulation Crowdfunding on eCFR for the formula.

Advertising. The offering runs on the intermediary’s platform, and the rules limit how the issuer promotes it outside that platform.

Filings and disclosure. Issuers disclose information in filings with the SEC and to investors and the intermediary.

Resale. Securities bought in a crowdfunding transaction generally cannot be resold for one year.

Where it fits. Early-stage and community-based companies that want many small investors and are comfortable with a platform-led process.

Regulation A (Reg A+)

What it is. An exemption from registration for public offerings, with features close to a registered offering. It has two tiers. According to the SEC, Tier 1 covers offerings up to $20 million in a 12-month period and Tier 2 up to $75 million. Offerings of up to $20 million can proceed under either tier.

Who can invest. Anyone, with a difference between the tiers. The SEC says Tier 2 limits how much a non-accredited investor may invest, though its page does not specify the caps.

State review. Tier 2 issuers do not have to register or qualify their offerings with state securities regulators. That is a major reason issuers choose Tier 2.

Filings and disclosure. The offering must be qualified by the SEC before sales can occur. The SEC says Tier 2 requires audited financial statements and ongoing reports. Both tiers have eligibility requirements and bad actor disqualification provisions.

Where it fits. Companies that want a broad public investor base and a larger raise than crowdfunding allows, and that can afford the legal and audit work of a more extensive disclosure process.

Regulation D (Rule 506)

Regulation D is a set of rules for private offerings. Rule 506 is the one most companies use.

Rule 506(b). The SEC describes it as a private placement that bars general solicitation. Sales are limited to no more than 35 non-accredited investors in any 90-calendar-day period, and each must have enough financial and business knowledge, alone or with a purchaser representative. An unlimited number of accredited investors may participate. The company can raise an unlimited amount.

Rule 506(c). It permits broad solicitation and general advertising, but all purchasers must be accredited investors, and the issuer must take reasonable steps to verify their status. Investor.gov gives examples of verification such as reviewing tax returns, W-2s or bank and brokerage statements.

Form D. Offerings under Rules 506(b), 506(c) and 504 must file Form D electronically on EDGAR within 15 days after the first sale, and the SEC charges no filing fee.

State law. Federal law preempts state registration and qualification for Rule 506 offerings, though states can still require notice filings and collect fees.

Resale. Buyers receive restricted securities.

Rule 504. The SEC’s overview also lists Rule 504, which covers offerings of up to $10 million in a 12-month period and is often used for multi-state offerings.

Where it fits. Companies raising larger amounts from accredited investors, funds and others that prefer a private process.

Side-by-side comparison

	Reg CF	Reg A Tier 1	Reg A Tier 2	Rule 506(b)	Rule 506(c)
Offering limit	$5 million per 12 months	$20 million per 12 months	$75 million per 12 months	No cap	No cap
Who can buy	General public, with investor limits	Public offering	Public offering, with limits for non-accredited	Accredited, plus up to 35 non-accredited	Verified accredited only
General solicitation	Offering runs through an online intermediary	Public offering	Public offering	Not allowed	Allowed
Notice or qualification	Filings with the SEC and the intermediary	SEC qualification	SEC qualification	Form D within 15 days of first sale	Form D within 15 days of first sale
State registration	See the rules	See the rules	Not required	Preempted, notice filings possible	Preempted, notice filings possible

Where a cell says “see the rules,” the SEC pages consulted for this guide do not state the point, so check Regulation Crowdfunding and Regulation A on eCFR. Rules on advertising and offering communications for Reg CF and Reg A are detailed and are set out in those regulations.

Choosing between them

Four questions usually drive the choice.

How much? A raise above $5 million rules out Reg CF. A raise above $20 million narrows Reg A to Tier 2.
From whom? If investors are mostly accredited, Rule 506 is flexible. If the plan is many small retail investors, Reg CF or Reg A fits.
How public? If the company wants to advertise widely, the options are Reg A, Reg CF through the platform or Rule 506(c) with verification.
What will follow? Reg A Tier 2 brings audited statements and continuing reports, while Rule 506 and Reg CF carry their own filing and reporting requirements that should be checked in the rules.

A worked example

A software startup wants $3 million. It could use Reg CF, accepting the platform process and the one-year resale restriction. Or it could use Rule 506(b) and sell to accredited investors it already knows, filing a Form D within 15 days of the first sale. If it later wants $30 million from the public, it might look at Reg A Tier 2, which would require audited financials and ongoing reporting. The amounts are hypothetical, and a securities lawyer should review any real plan.

Questions to ask a securities lawyer

Whichever route looks best, a few questions are worth raising early. Does the company and its management meet the eligibility and bad actor requirements for the exemption? How will offering materials and online posts be reviewed so that advertising stays within the rules? What state notice filings or fees apply? How will the company keep its cap table manageable if it sells to many small investors? And what reporting will the company owe after the offering closes? The answers can change the cost and timeline of a raise as much as the headline offering limit does.

Common misconceptions

“Exempt means unregulated.” Exempt offerings remain subject to antifraud rules and, in many cases, bad actor disqualification.
“Reg A+ is a type of IPO.” It is a public offering exempt from registration, with its own qualification process and ongoing requirements.
“Rule 506(c) lets anyone invest.” Only accredited investors can buy, and the issuer must verify them.
“Form D is an approval.” It is a notice filing.

FAQ

Which exemption allows the largest raise?

Rule 506 has no dollar cap, per the SEC, while Reg A tops out at $75 million for Tier 2 and Reg CF at $5 million.

Can I advertise a Rule 506 offering?

Under Rule 506(b), no. Under Rule 506(c), yes, if every buyer is an accredited investor and the issuer takes reasonable steps to verify that status.

Do I need audited financial statements?

For Reg A Tier 2, the SEC says yes. Other requirements depend on the exemption and the amount, so check the rules.

Do state securities regulators review these offerings?

Reg A Tier 2 and Rule 506 offerings are not subject to state registration or qualification, though states may require notice filings for Rule 506.

Can I combine exemptions?

Sometimes, but integration rules apply. Take legal advice before running overlapping offerings.

Is this legal or investment advice?

No. It is general education. Consult a securities attorney before an offering and read the official SEC materials.

Prepared with AI assistance from public sources and reviewed under our editorial policy. Not investment advice.