What is Reg D?
Regulation D (Reg D) is a Securities and Exchange Commission (SEC) exemption that allows companies to raise capital through private placements without registering securities with the SEC. Most tokenized securities and RWA products offered to US investors use Reg D exemptions.
Reg D Rules Overview
Rule 504
- Limit: Up to $10 million in 12 months
- Investors: May include non-accredited investors
- Restrictions: State law governs, limited advertising
Rule 506(b)
- Limit: Unlimited raising amount
- Investors: Unlimited accredited + up to 35 sophisticated non-accredited
- Restrictions: No general solicitation or advertising
- Most common: Traditional private placements
Rule 506(c)
- Limit: Unlimited raising amount
- Investors: Accredited investors only
- Restrictions: General solicitation permitted
- Verification: Must take reasonable steps to verify accreditation
- Preferred for RWA: Allows marketing while maintaining compliance
Why RWA Projects Use Reg D
Tokenized assets often qualify as securities, requiring:
- SEC registration (expensive, time-consuming), OR
- Exemption from registration (Reg D)
Reg D provides a path to legally offer tokenized securities while avoiding full SEC registration.
Reg D Requirements for Issuers
- Form D filing: File with SEC within 15 days of first sale
- Investor verification: Confirm accredited status (506c)
- Information requirements: Provide material information
- State compliance: Blue sky law filings
- Bad actor checks: Verify no disqualifying events
- Ongoing compliance: Maintain records, limit transfers
Accreditation Verification (506c)
Issuers must verify accreditation through:
- Third-party verification services
- Tax returns and financial statements
- CPA, attorney, or broker-dealer letters
- W-2s and bank statements
Transfer Restrictions
Reg D securities have resale limitations:
- Rule 144: 6-12 month holding period before resale
- Restricted legends: Tokens marked as restricted
- Transfer controls: Smart contract restrictions on transfers
- Secondary markets: Limited to qualified platforms
Reg D Tokenized Products
| Product | Rule | Investor Type |
|---|---|---|
| Ondo OUSG | 506(c) | Accredited |
| BlackRock BUIDL | 506(c) | Institutional |
| Securitize offerings | 506(b/c) | Accredited |
| Maple pools | 506(b) | Accredited |
Reg D vs Reg A+ vs Reg S
| Aspect | Reg D | Reg A+ | Reg S |
|---|---|---|---|
| Investors | Accredited (506c) | Anyone | Non-US only |
| Limit | Unlimited | $75M/year | Unlimited |
| SEC review | No | Yes | No |
| Resale | Restricted | Free trading | Restricted |
| Cost | Lower | Higher | Lower |
Implications for Investors
- Must verify accreditation status
- Accept holding period restrictions
- Limited liquidity in secondary markets
- Need qualified custodian in some cases
Evolution of Tokenized Securities
As regulatory frameworks develop, expect:
- Clearer SEC guidance on token classification
- More Reg A+ offerings for retail access
- Improved secondary market infrastructure
- Potential new tokenization-specific exemptions