Conducting an Unregistered Offering of Securities:
The Complete Guide for Oklahoma Business Owners

Raising capital is one of the most important and most challenging aspects of building a business. For the vast majority of small and mid-size companies, a full public offering registered with the Securities and Exchange Commission (SEC) is not practical, not affordable, and not necessary. The good news is that federal securities law provides a wide array of exemptions that allow businesses to sell ownership stakes or debt securities to investors without going through the full registration process. These transactions are known as unregistered offerings or private placements, and they are the primary fundraising vehicle for growth-stage companies across the country.

For Oklahoma entrepreneurs and business owners, understanding how private placements work is not just an academic exercise. It is a practical necessity. Whether you are a technology company in Oklahoma City seeking angel or venture investment, a manufacturing operation in Tulsa looking to raise debt capital from institutional investors, or an energy services firm raising funds from a small group of accredited investors, you are almost certainly relying on one of these securities law exemptions. Getting the structure right from the beginning protects your company, your investors, and your ability to raise future capital.

This guide walks through how unregistered offerings work in practice, covering the key exemptions available, who is involved in the process, what documents are required, how the offering process unfolds from start to finish, and what Oklahoma-specific considerations apply to your transaction.

Table of Contents

• What is an Unregistered Offering?
• Types of Unregistered Offerings
• Who is Involved in a Private Placement?
• Key Documents in an Unregistered Offering
• The Offering Process: Start to Finish
• Investor Qualification Requirements
• General Solicitation Rules and Restrictions
• Oklahoma-Specific Considerations
• Common Mistakes That Jeopardize Your Offering
• When You Need Legal Guidance

What is an Unregistered Offering?

An unregistered offering is the sale of securities by a company without registering those securities with the SEC under Section 5 of the Securities Act of 1933. Instead of going through the lengthy and expensive registration process, the company relies on one of the statutory or rule-based exemptions from registration that Congress and the SEC have made available.

The reason these exemptions exist is straightforward: the registration process was designed primarily for large public offerings to retail investors who lack sophisticated financial knowledge and the ability to independently evaluate risk. When a company is selling to a limited number of sophisticated investors who have the resources and expertise to evaluate the investment on their own, the full disclosure requirements of a registered offering are less necessary. The exemptions reflect this policy judgment by relaxing the registration requirement while still keeping the anti-fraud protections of federal securities law firmly in place.

It is worth emphasizing a critical point that many business owners misunderstand: exemption from registration does not mean exemption from the anti-fraud provisions of federal securities law. Every statement made to potential investors in an unregistered offering, whether in a written offering document or verbally during a management presentation, is subject to liability if it is false or misleading. The SEC’s enforcement authority does not disappear simply because you are relying on a private placement exemption.

In practice, the terms “unregistered offering” and “private placement” are often used interchangeably, though technically a private placement is a specific type of unregistered offering conducted directly by the issuer rather than through a public market.

Types of Unregistered Offerings

Federal securities law provides several different exemptions from registration, each with its own rules, limitations, and investor eligibility requirements. The right exemption for your company depends on the size of your raise, the types of investors you are targeting, and whether you want to use advertising or general solicitation to find investors.

Regulation D Offerings

Regulation D, promulgated by the SEC under the Securities Act, provides three separate exemptions that cover the vast majority of private placements conducted by smaller companies. These are Rule 504, Rule 506(b), and Rule 506(c), and they differ significantly in their requirements and limitations.

Rule 504 is the smallest of the three, allowing companies to raise up to $10 million in a 12-month period. It can be used for sales to an unlimited number of investors, including non-accredited investors, and does not require the company to provide specific disclosures. However, it generally does not preempt state securities laws, meaning you may need to comply with the securities laws of every state where you offer or sell securities. For most Oklahoma businesses, Rule 504 is most useful for very early-stage raises involving a small, local investor group.

Rule 506(b) is by far the most commonly used Regulation D exemption. It allows companies to raise an unlimited amount of capital from accredited investors and up to 35 non-accredited but sophisticated investors, with no dollar cap on the offering. Critically, Rule 506(b) preempts most state securities laws, meaning a company that properly qualifies under Rule 506(b) does not need to register its offering separately with Oklahoma’s securities regulators. The primary restriction is that you cannot use general solicitation or advertising to find investors. You must have a pre-existing, substantive relationship with investors or rely on intermediaries such as registered broker-dealers to source them.

Rule 506(c) was added by the JOBS Act amendments of 2012 and addresses the biggest practical limitation of Rule 506(b) by allowing general solicitation and advertising. Under Rule 506(c), a company can run online advertisements, post on social media, discuss its offering at public events, and otherwise broadly publicize its fundraising, as long as all actual sales are made only to verified accredited investors. The verification requirement is more demanding than under Rule 506(b): the company cannot simply rely on an investor’s self-certification of accredited status, but must take reasonable steps to independently verify it through documentation such as tax returns, bank statements, or third-party verification letters.

Rule 144A Offerings

Rule 144A is a resale exemption primarily used by large companies raising debt or equity capital from major institutional investors. Unlike Regulation D offerings, which involve direct sales by the issuer to investors, a Rule 144A offering involves investment banks that initially purchase the securities from the company and immediately resell them to Qualified Institutional Buyers (QIBs), which are large institutions managing at least $100 million in securities. The process closely resembles a registered public offering in terms of disclosure standards and due diligence, but without the requirement of SEC registration. For most Oklahoma small to mid-size businesses, Rule 144A is not the right vehicle, but it becomes relevant for more mature companies with institutional investor relationships.

Section 4(a)(2) Exemption

Before Regulation D was adopted, the primary basis for private placements was the statutory exemption in Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering. Regulation D’s Rule 506 is a safe harbor under this section, meaning a company that complies with Rule 506 automatically satisfies the Section 4(a)(2) exemption. Companies sometimes rely on Section 4(a)(2) directly when their transaction does not fit neatly into a Regulation D box, but this approach requires more fact-specific legal analysis.

Who is Involved in a Private Placement?

The group of people and firms working together to complete a private placement is commonly called the “working group,” and its composition varies depending on the size and complexity of the offering. Understanding who these parties are and what role each plays helps business owners know what to expect and who they need on their team.

The Issuer and Its Management Team

The issuer is the company selling the securities, and it is the central party in any private placement. For smaller companies, the CEO and CFO typically lead the fundraising effort. For larger companies, the CFO, treasurer, and finance and legal departments take more prominent roles. Management is responsible for making the key strategic decisions about the offering: what type of securities to sell, how much to raise, which exemption to rely on, what the use of proceeds will be, and whether to grant registration rights to investors. These decisions belong to the management team and board of directors, even when advisors provide extensive input.

Legal Counsel for the Issuer

Experienced securities counsel is essential in any private placement. The company’s attorneys take primary responsibility for drafting the offering documents, structuring the transaction to qualify for the appropriate exemption, advising on investor eligibility and solicitation rules, drafting and negotiating the transaction documents, and advising on state securities law compliance. Counsel also plays a critical role in managing the anti-fraud risk of the offering by ensuring that all disclosures are accurate, complete, and not misleading.

Placement Agents and Investment Banks

In many private placements, especially those involving a broader investor base, the company retains a placement agent, typically a registered broker-dealer, to help find and solicit potential investors. The placement agent’s primary role is to identify investors willing to participate in the offering, facilitate communications between the issuer and investors, and help negotiate the transaction terms. In a traditional private placement, the placement agent acts as an agent of the company and does not purchase the securities for its own account. In a Rule 144A offering, the investment banks involved are called “initial purchasers” because they do briefly purchase the securities before immediately reselling them to institutional buyers.

If you use a placement agent, that agent must be a registered broker-dealer under the Securities Exchange Act. Using an unregistered finder or intermediary to solicit investors in exchange for compensation is itself a violation of federal securities law and can jeopardize your entire offering.

Auditors

In larger or more formal private placements, the company’s independent auditors play a key supporting role. Audited financial statements are often included in or provided alongside the offering document, and investors frequently require them as a condition of investment. In Rule 144A offerings, auditors provide a “comfort letter” addressed to the investment banks confirming the accuracy of financial information in the offering document. For smaller Regulation D offerings, audited financials may not be legally required, but sophisticated investors will often request them, and having them in place signals financial credibility and organizational maturity.

Key Documents in an Unregistered Offering

The documents required in a private placement vary by transaction type, but several core documents appear in nearly every offering. Understanding what these documents do and why they matter helps business owners engage more productively with their legal and financial advisors.

The Offering Document: PPM or Offering Memorandum

The offering document is the primary disclosure document delivered to potential investors. In a traditional private placement, it is usually called a Private Placement Memorandum (PPM). In a Rule 144A offering, it is called the Offering Memorandum (OM). These documents serve the same function as a prospectus in a registered public offering: they give investors the information they need to evaluate the investment opportunity.

A well-drafted PPM typically includes a description of the company and its business, detailed financial statements, a summary of the terms of the securities being offered, a comprehensive risk factors section, a discussion of how the company plans to use the proceeds, background information on management, and a description of the transfer restrictions that apply to the securities. The level of detail and formality varies significantly depending on the size of the raise and the sophistication of the investor base.

Not every Regulation D offering requires a PPM. Under Rule 506(b), a PPM is legally required only when non-accredited investors are participating. When selling exclusively to accredited investors, you are not legally required to provide any specific disclosure document. However, from a practical and anti-fraud liability standpoint, providing a PPM is strongly advisable in any offering of meaningful size. If you make false or misleading statements to investors, you face liability whether or not you had a formal offering document. A carefully drafted PPM that accurately discloses material information is your best protection against future investor disputes and regulatory scrutiny.

The Subscription Agreement or Securities Purchase Agreement

The subscription agreement (for equity offerings) or securities purchase agreement (commonly used in debt offerings and more formal transactions) is the binding contract between the company and each investor. It sets out the price, terms, and conditions of the sale, and contains the representations and warranties that both parties are making to each other. From the investor’s side, the most important representations are the confirmation that the investor is an accredited investor, that the investor is purchasing for investment and not for resale, and that the investor understands the transfer restrictions on the securities. From the company’s side, the agreement typically contains representations about the accuracy of the information provided in the offering documents and the company’s organizational and financial condition.

In some smaller offerings, the subscription agreement is a relatively simple document. In more complex or larger offerings, especially those involving institutional investors, the securities purchase agreement may be extensively negotiated and include covenants, closing conditions, indemnification provisions, and other protective terms.

Investor Questionnaires

In Regulation D offerings, the company is responsible for verifying that investors meet the applicable eligibility requirements. The investor questionnaire is the primary tool for collecting the information needed to make this determination. The questionnaire asks investors to provide information establishing that they are accredited investors (or, in Rule 506(b) offerings, that they are sophisticated) and confirms that they are not acting as conduits for unqualified investors.

In Rule 506(c) offerings that allow general solicitation, a questionnaire alone is not sufficient. The company must take additional steps to verify accredited investor status, such as reviewing tax returns, bank statements or brokerage account statements, or obtaining a written certification from a licensed professional such as a CPA, attorney, or registered investment adviser. This heightened verification requirement is one reason many companies prefer Rule 506(b) despite its no-general-solicitation restriction.

Registration Rights Agreement

In some private placements, especially larger transactions and Rule 144A deals, investors negotiate for registration rights that give them the ability to require the company to register their securities for resale at a future date. Common forms include demand registration rights (investors can force a registration), piggyback rights (investors can include their shares if the company conducts a registered offering), and shelf registration rights (the company must maintain a shelf registration statement covering resales). Registration rights are particularly valuable to institutional investors who need to eventually exit their investment, and they are a standard feature of venture capital and growth equity financings in Oklahoma and nationally.

Post-Closing Filings: Form D

A critical post-closing obligation in every Regulation D offering is the filing of Form D with the SEC within 15 days after the first sale of securities. Form D provides the SEC with basic information about the issuer, the offering, and the use of proceeds. It is a relatively simple filing, but failing to file it is a violation that can result in loss of the Regulation D exemption and, in some states, jeopardize your ability to conduct future offerings. Oklahoma also has its own state-level notice filing requirement that must be satisfied separately, as discussed in the Oklahoma-specific section below.

The Offering Process: Start to Finish

Understanding the sequence of events in a typical private placement helps business owners plan their fundraising timeline and know what to expect at each stage. While the details vary by transaction, most offerings follow a broadly similar arc.

Stage 1: Strategic Planning and Structuring

Before any documents are drafted or investors are contacted, the company needs to make several foundational decisions in consultation with legal counsel. These include: what type of securities to offer (equity, convertible debt, straight debt, or preferred stock), which exemption to rely on, what the target raise amount is, whether a placement agent is needed, whether general solicitation is permissible and desirable, and what investor eligibility requirements will apply. These structural decisions drive every subsequent step of the process, so getting them right from the beginning is essential.

This is also the stage at which the company should conduct an internal review of its corporate governance and capitalization to identify any issues that might complicate the offering, such as unclear cap table ownership, missing corporate documentation, or prior securities transactions that may not have been properly structured.

Stage 2: Drafting the Offering Documents

Once the structure is determined, the company and its counsel begin drafting the offering documents. Preparing a comprehensive PPM is often the most time-consuming step in the process. For companies that have never previously documented their business in a formal offering document, assembling the required information about the company’s history, operations, financial condition, competitive position, and management team can take weeks or months. Companies that have already prepared a detailed business plan or investor deck have a significant head start.

The risk factors section deserves particular attention. Many companies make the mistake of using generic, boilerplate risk factors that do not honestly describe the specific risks of their business. Investor disputes and regulatory actions often focus on whether the company adequately disclosed the risks that ultimately materialized. Counsel should work with management to identify and disclose the risks that are actually material to this particular company and this particular offering.

Stage 3: Due Diligence

Due diligence in a private placement is a comprehensive investigation of the company’s business, financial condition, legal standing, and the material risks associated with investing in it. If a placement agent or investment bank is involved, their counsel will conduct legal due diligence by reviewing the company’s material contracts, corporate records, intellectual property documentation, employment matters, and other key business documents. Even in direct placements without an investment bank, sophisticated investors will conduct their own due diligence, and the company needs to be prepared to respond to detailed inquiries.

From the company’s perspective, the due diligence process is not just a burden but an opportunity. The exercise of responding to due diligence inquiries often surfaces legal or operational issues that management did not realize existed and that should be addressed before they become larger problems. Many Oklahoma business owners discover during their first private placement that their corporate records are incomplete, that key agreements are not properly documented, or that there are cap table discrepancies that need to be resolved. Better to find and fix these issues in a controlled setting than to have them discovered by an investor after money has already changed hands.

Stage 4: Investor Outreach and Subscription

With documents in hand, the company begins the process of identifying, approaching, and closing investors. In a Rule 506(b) offering, this means relying on the company’s existing network, referrals from trusted advisors, or introductions through a registered placement agent, without any public advertising or general solicitation. In a Rule 506(c) offering, the company may actively advertise the offering through online platforms, social media, investor events, and other channels.

As investors indicate interest, they are typically asked to complete investor questionnaires, review the offering documents, and execute subscription agreements. The company’s counsel reviews the incoming subscriptions to verify investor eligibility and ensure that the offering is proceeding in compliance with the applicable exemption requirements. The company formally accepts subscriptions by countersigning the subscription agreements or, if the offering has a minimum threshold, after sufficient subscriptions have been received to satisfy the minimum.

Stage 5: Closing and Post-Closing Compliance

At closing, the investors fund their subscriptions (either directly to the company or through an escrow account that releases upon satisfaction of the closing conditions), and the company delivers the securities. In equity offerings, this means updating the company’s capitalization table and issuing stock certificates or electronic book entries. In debt offerings, this means delivering executed promissory notes or executing an indenture.

Post-closing, the company must file Form D with the SEC within 15 days of the first sale and comply with applicable state notice filing requirements. The securities issued bear restrictive legends confirming that they are restricted securities that cannot be freely resold without registration or a valid exemption.

Investor Qualification Requirements

A central feature of most private placement exemptions is that securities can only be sold to investors who meet certain qualification criteria. Understanding these criteria is essential for both structuring your offering and maintaining the validity of your exemption.

Who Qualifies as an Accredited Investor?

The definition of accredited investor was expanded by the SEC in 2020 to reflect the reality that financial sophistication is not solely a function of wealth. The traditional income and net worth thresholds remain: individuals qualify if they have annual income exceeding $200,000 (or $300,000 jointly with a spouse) in each of the two most recent years with a reasonable expectation of the same in the current year, or if they have a net worth exceeding $1 million, excluding the value of their primary residence. However, the updated definition also includes individuals holding certain professional certifications (such as Series 7, Series 65, or Series 82 licenses), knowledgeable employees of private investment funds, and certain entities meeting asset thresholds or where all equity owners are individually accredited.

For entities such as corporations, partnerships, and trusts, the accredited investor thresholds are based on total assets, ownership structure, or other factors depending on the entity type. Any entity with total assets exceeding $5 million that was not formed for the specific purpose of making the investment qualifies, as do trusts managed by a bank or other institutional fiduciary.

Non-Accredited but Sophisticated Investors

Rule 506(b) allows sales to up to 35 non-accredited investors, but only if they are “sophisticated,” meaning they have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the investment on their own, or they have a qualified purchaser representative advising them. When non-accredited investors participate, Rule 506(b) requires the company to provide them with specific disclosure information that meets the standards of Regulation D’s Rule 502(b), including audited financial statements in some cases. As a practical matter, selling to non-accredited investors adds significant complexity and liability risk, and most counsel advise against it unless there is a compelling reason.

General Solicitation Rules and Restrictions

The rules governing how you can communicate with potential investors are among the most confusing and frequently violated aspects of private placement law. Getting this wrong can invalidate your entire offering.

The Rule 506(b) No-General-Solicitation Requirement

If you rely on Rule 506(b), you absolutely cannot use general solicitation or advertising to promote your offering. This means no public social media posts about your fundraising, no announcements in press releases or newsletters, no presentations at events where the general public is invited, and no email blasts to lists of contacts you do not have a pre-existing relationship with. The requirement of a pre-existing, substantive relationship is strictly interpreted: a brief introduction at a networking event does not establish the kind of substantive prior relationship that satisfies this requirement.

The SEC has provided guidance on what constitutes general solicitation through a series of no-action letters and rules. Certain types of communications are carved out, including communications at demo day events sponsored by universities, government entities, nonprofit organizations, or angel investor groups, as long as those events meet specific conditions regarding the nature of the communications and the exclusion of investment recommendations.

The Rule 506(c) General Solicitation Permission

Under Rule 506(c), general solicitation and advertising are expressly permitted, but the tradeoff is that every investor in the offering must be an accredited investor, and the issuer must take affirmative, reasonable steps to verify that status. Common verification methods include reviewing IRS Form W-2s or tax returns to verify income, reviewing bank or brokerage statements to verify net worth, or obtaining a written letter from a licensed attorney, CPA, or registered investment adviser certifying the investor’s accredited status. The SEC has also approved third-party verification services that aggregate and review documentation for this purpose.

For companies that want to use online fundraising platforms, social media, or investor relations campaigns to find investors, Rule 506(c) is the appropriate exemption. The additional verification burden is manageable and is becoming more streamlined as online verification services have developed.

Oklahoma-Specific Considerations

While federal securities law provides the primary framework for private placements, Oklahoma has its own securities statute that imposes additional requirements on companies raising capital in or from Oklahoma investors. Understanding these state-level obligations is essential for any Oklahoma business conducting a private placement.

The Oklahoma Securities Act

Oklahoma’s primary securities statute is the Oklahoma Securities Act of 2004, administered by the Oklahoma Department of Securities. Like most state securities laws, the Oklahoma Act requires that securities offered or sold in Oklahoma be either registered with the state or exempt from registration. For companies relying on Regulation D Rule 506, federal law under the National Securities Markets Improvement Act of 1996 (NSMIA) preempts state registration requirements for “covered securities,” which include Rule 506 offerings. This means you generally do not need to register your Rule 506 offering with Oklahoma’s Department of Securities.

However, preemption does not mean complete exemption from state oversight. Oklahoma requires issuers relying on Rule 506 to file a notice with the Oklahoma Department of Securities within 15 days after the first sale of securities in the state. This notice filing consists primarily of submitting a copy of the Form D you filed with the SEC, along with a filing fee based on the size of the offering. Failure to make the required state notice filing can result in enforcement action by the Oklahoma Department of Securities even if your federal Regulation D filing is otherwise perfect.

Oklahoma Notice Filing Fees and Requirements

The Oklahoma notice filing fee for Regulation D offerings is based on a percentage of the aggregate offering amount allocated to Oklahoma investors. For most small to mid-size offerings, the fee is relatively modest, but it must be paid within the required timeframe. Oklahoma also imposes anti-fraud provisions through the Oklahoma Securities Act that apply to all securities transactions in the state regardless of exemption, reinforcing the federal prohibition on material misstatements and omissions in connection with securities sales.

Rule 504 and Non-Covered Offerings

If your offering does not qualify as a covered security under NSMIA (such as a Rule 504 offering or an offering under Section 4(a)(2) without the Rule 506 safe harbor), you may need to separately qualify the securities under Oklahoma’s exemption provisions. Oklahoma provides several exemptions from registration, including exemptions for sales to accredited investors and limited offerings to a small number of Oklahoma residents. If your offering involves investors in multiple states, you may need to analyze the securities laws of each state in which investors are located, which is one of the primary practical advantages of using Rule 506 to gain the benefit of NSMIA preemption.

Oklahoma’s Entrepreneurial Ecosystem and Private Placements

Oklahoma has developed a meaningful infrastructure for private capital formation that business owners should be aware of. The i2E organization provides capital access programs and connects Oklahoma entrepreneurs with accredited investors and venture capital sources. The Oklahoma Center for the Advancement of Science and Technology (OCAST) provides matching grant programs that can complement private capital raises for technology and innovation companies. Various angel investor groups and venture capital funds operate in the Oklahoma City and Tulsa markets, providing a local accredited investor base for early-stage companies.

For energy companies, Oklahoma’s deep oil and gas industry creates a particularly active market for private capital, with many high-net-worth individuals and family offices in the state having both the accredited investor qualifications and the industry knowledge to evaluate energy-related investment opportunities.

Common Mistakes That Jeopardize Your Offering

Private placement law is a field where seemingly small missteps can have enormous legal and financial consequences. Based on the patterns we see in practice, these are the issues that most frequently trip up Oklahoma businesses conducting their first or second private placement.

Treating the Offering as Informal Because You Know the Investors

Many business owners assume that because they are raising money from friends, family, or business acquaintances, they do not need formal offering documents or legal counsel. This assumption is wrong and dangerous. The anti-fraud provisions of the securities laws apply to sales to friends and family just as they apply to sales to institutional investors. If a company fails to disclose a material risk to an investor who is the founder’s college roommate, that investor has the same legal rights to rescind the investment as any sophisticated institutional investor would have. The familiarity of the relationship does not reduce the legal obligations of the offering.

Failing to Verify Investor Status

In Rule 506(b) offerings, many companies accept investor questionnaires without reviewing them carefully or following up on inconsistencies. In Rule 506(c) offerings, many companies rely on bare self-certification rather than taking the required affirmative verification steps. Both of these practices create the risk that the offering will be found to have been made to unqualified investors, which can jeopardize the exemption for all investors in the offering.

Inadvertent General Solicitation

This is one of the most common compliance failures in modern private placements. A company’s CEO posts on LinkedIn that the company is “excited to announce its Series A fundraising round.” A company lists its offering on an online platform that is accessible to the general public without investor pre-qualification. A company sends a fundraising email to a purchased list of contacts without a prior substantive relationship. Any of these actions can constitute general solicitation that invalidates a Rule 506(b) offering. Once you have engaged in general solicitation, you cannot retroactively convert the offering to Rule 506(c) while keeping earlier investors, and you may have lost your exemption entirely.

Skipping the Form D Filing

The Form D filing deadline of 15 days after the first sale is strict, and it is frequently missed by companies that are focused on closing the deal and not thinking about post-closing compliance. Missing the filing creates an independent regulatory violation that can complicate future fundraising and attract SEC attention. Set a reminder to file Form D the day you close your first investor, and simultaneously address your state notice filing obligations.

Inadequate Documentation of the Offering

The burden of proving exemption compliance falls on the company. If the SEC or a state regulator investigates your offering, or if an investor later claims the offering was not properly conducted, you need to be able to document every step: the basis for each investor’s accredited status, the nature of your prior relationship with each investor in a Rule 506(b) offering, the content of all communications with potential investors, and the timeline of the offering. Maintaining a detailed offering file from the beginning of the process is not optional.

When You Need Legal Guidance

Given the complexity and the consequences of getting it wrong, nearly every private placement benefits from experienced legal counsel. But the nature and intensity of that engagement can vary based on the size and complexity of your transaction.

Situations Where Counsel is Non-Negotiable

You should always engage experienced securities counsel when you are conducting a private placement of any meaningful size, when you are raising from investors who are not already sophisticated participants in your industry, when your offering involves multiple investors in multiple states, when your offering involves complex securities structures such as convertible notes, SAFEs, preferred stock, or warrants, or when you plan to use general solicitation or online fundraising platforms. These situations involve legal complexity and risk that experienced counsel is specifically trained to navigate.

Ongoing Legal Support Beyond the Closing

The legal obligations of a private placement do not end at closing. Depending on the terms of your offering, you may have ongoing reporting obligations to investors, restrictions on certain corporate actions, registration rights that require attention when you pursue future financings or a public offering, and ongoing compliance obligations under state and federal securities laws. Building an ongoing relationship with securities counsel, rather than treating the private placement as a one-time engagement, positions your company to handle these obligations effectively and to structure future capital raises on a solid legal foundation.

Frequently Asked Questions About Private Placements

• Do I need a Private Placement Memorandum (PPM) for every Regulation D offering?

  Not legally, but practically you should have one for any meaningful raise. Under Rule 506(b), a PPM is legally required when non-accredited investors participate. When selling exclusively to accredited investors, there is no specific document requirement, but providing full and accurate disclosure in a formal PPM is your best protection against investor disputes and anti-fraud liability. For any raise over $250,000 or involving investors who are not close personal relationships, a PPM is strongly advisable.

• How long do investors have to hold their securities before they can resell them?

  Securities sold in a Regulation D private placement are “restricted securities” and generally cannot be freely resold for a minimum of six months (for SEC reporting companies) or one year (for non-reporting private companies) under Rule 144. After the applicable holding period, investors can resell under Rule 144 subject to volume limitations and other conditions. Investors who negotiate registration rights can potentially resell earlier if the company registers the securities for resale. These restrictions should be clearly explained to investors at the time of the offering.

• Can I use crowdfunding platforms for my Oklahoma business raise?

  Yes, but the rules depend on what type of platform you use. Investment crowdfunding under Regulation Crowdfunding (Reg CF) is a different exemption from Regulation D that allows companies to raise up to $5 million per 12-month period from both accredited and non-accredited investors through SEC-registered funding portals. This is distinct from donation or reward crowdfunding platforms like Kickstarter. Reg CF has specific disclosure and investor protection requirements that differ significantly from Regulation D. An experienced securities attorney can help you evaluate whether Reg CF or Regulation D is more appropriate for your specific situation.

• What happens if I accidentally violate the no-general-solicitation rule in a Rule 506(b) offering?

  This is a serious problem. If you have engaged in general solicitation while purporting to rely on Rule 506(b), you have lost the Rule 506(b) exemption. This means you may have violated Section 5 of the Securities Act, which gives investors the right to rescind their purchases and recover their investment from you, plus statutory interest. You cannot retroactively switch to Rule 506(c) to save a Rule 506(b) offering that has already been corrupted by general solicitation. If this happens, you need experienced securities counsel immediately to assess your options and mitigate the damage.

• Does Oklahoma have its own accredited investor definition different from the federal one?

  No. Oklahoma generally follows the federal definition of accredited investor for purposes of its securities law exemptions. However, Oklahoma’s exemptions have their own specific requirements, and the application of state exemptions to a particular transaction requires careful analysis. Companies relying on the NSMIA preemption for Rule 506 offerings are primarily concerned with federal accredited investor standards, but any offering that might fall outside the Rule 506 safe harbor requires separate analysis of Oklahoma’s state-level investor qualification requirements.

• Can a foreign company raise capital from Oklahoma investors through a private placement?

  Yes, foreign issuers can generally rely on the same Regulation D exemptions as domestic issuers when selling to U.S. investors. However, there are additional considerations, including whether the company qualifies for the exemption, how foreign financial statements should be presented, and whether the offering structure implicates any additional regulatory requirements. Foreign companies raising capital from U.S. investors should engage counsel with both domestic and cross-border securities experience.

• How many investors can I have in a Rule 506(b) offering?

  There is no limit on the number of accredited investors in a Rule 506(b) offering. The restriction is that you can sell to no more than 35 non-accredited (but sophisticated) investors. As a practical matter, most Rule 506(b) offerings that include non-accredited investors keep that number well below the 35-investor cap, and many companies simply decide to limit their offering exclusively to accredited investors to avoid the additional complexity and disclosure requirements that come with non-accredited investor participation.

• What is the difference between a SAFE and a convertible note in a private placement context?

  Both SAFEs (Simple Agreements for Future Equity) and convertible notes are common early-stage financing instruments that raise capital today in exchange for equity at a future financing round. Convertible notes are debt instruments that bear interest and have a maturity date, while SAFEs are not debt and have no maturity date or interest. Both qualify as “securities” subject to the registration requirements of federal and state securities law, meaning they must be sold pursuant to a valid exemption such as Rule 506. Y Combinator’s standard SAFE documents have become widely adopted in the startup community and provide a starting point, but any instrument should be reviewed and adapted by counsel familiar with Oklahoma law and your specific transaction.

Disclaimer: This article provides general information about federal and Oklahoma securities law relating to unregistered offerings and private placements and should not be considered specific legal advice. Securities law is complex and changes frequently, and the application of any exemption depends on the specific facts and circumstances of your transaction. For guidance on your specific offering, consult with qualified Oklahoma securities counsel before commencing any offering of securities.

About Cantrell Law Firm: We are Oklahoma business attorneys who help entrepreneurs, startups, and growing businesses navigate the legal and regulatory complexities of raising capital. Our practical, founder-focused approach combines deep technical knowledge with real business experience to help clients structure transactions that work. Contact us to discuss your private placement or securities law needs.