FINRA Regulation of Broker-Dealer Due Diligence in Regulation D Offerings


This practice note discusses FINRA regulations applying to broker-dealer due diligence in Regulation D offerings. Under the Securities Act of 1933, as amended (Securities Act), any offer to sell or sale of securities must be registered with the U.S. Securities and Exchange Commission (Commission) or qualify for a registration exemption. Securities Act Regulation D encompasses three such exemptions: Rules 504 (17 C.F.R. § 230.504), 505 (17 C.F.R. § 230.505), and 506 (17 C.F.R. § 230.506). However, under final rules adopted by the SEC on October 26, 2016 and which will become effective in mid-2017, Rule 505 has been repealed.