Section 4(a)(5) Securities Registration Exemption - Explained
Statutory Securities Law Exemption
Written by J. Mance Gordon
Updated at April 20th, 2024
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What is a Section 4 exemption from registration under the 33 Act?
Section 4 provides for two statutory exemptions from registration of securities by an issuer. The exemptions available under Section 4 of the 33 Act provide for transactional exemptions for the securities, rather than a blanket exemption for the security itself.
What is Section 4(a)(5)?
Statutory Exemption for Accredited Investors - Section 4(a)(5) -Section 4(a)(5) of the 33 Act provides a statutory exemption for securities sold in accordance with its provisions.
Note: The notable difference between Section 4(a)(5) and Regulation D exemptions is that Regulation D also allows for sales to non-accredited investors. Section 4(a)(5) is rarely used as a stand-alone exemption. The reason is because this statutory exemption generally fits within the rule-based exemptions of regulation D (Rules 505 and 506, for example), but does not contain many of the benefits.
What are the Limitations of a Section 4(a)(5) statutory exemption?
The following limitations apply to a Section 4(a)(5) issuance:
- Disclosure - The issuer must provide a prospectus to purchases that complies with 33 Act disclosure provisions;
- Accredited Investors - The issuer can only offer and sell securities to accredited investors;
- General Solicitation - The issuer cannot undertake any advertising or other forms of general solicitation of purchasers;
- Dollar Value - The maximum offering amount cannot exceed $5,000,000;
- Notice - The issuer must provide notice of sale to the SEC;
- Restricted Securities - Securities sold under section 4(a)(5) constitute "restricted securities" under Rule 144(a)(3) and cannot be resold in the future without registration or perfection of a separate exemption; and
- State Registration - Securities exempted under section 4(a)(5), like some other statutory exemptions, do not fall within the meaning of a federally covered security. The result is that federal law does not preempt state laws regulating the securities.
Related Topics
- Securities Law (Intro)
- What are Securities Laws?
- What is a Security?
- What qualifies as an Investment contract?
- What are the primary federal securities laws?
- What are the regulatory goals of security laws?
- What is the Securities and Exchange Commission?
- What is an Initial Public Offering?
- What is a Direct Public Offering?
- What is Crowdfunding?
- Securities Act of 1933
- What is an Offer to Sell securities?
- Who are the parties regulated in an offer to sell securities?
- What are the primary disclosure documents required in an offer to sell securities?
- Forward Looking
- Red Herring Prospectus (Securities) Definition
- Registration of Securities
- What is an issuer allowed to do at each stage of the registration process?
- How are issuers classified for purposes of the registration and offering process?
- What is an issuer allowed to do during the Pre-filing Period?
- What are the limitations on the issuer during the Post-filing, Waiting Period?
- What is an issuer allowed to do during the Post-Effective Period?
- What is an Emerging-Growth Company?
- What type of information must an issuer disclose?
- What laws govern the mechanics of disclosure in a securities offering?
- Deficiency Letter (Securities Law)
- Registration Exemptions Securities Act of 1933
- What are Exempt Securities and Exempt Transactions?
- What are Restricted Securities?
- Section 3(a)?
- Section 3(b)?
- What is a Rule 147 Exemption?
- What is a Section 4(a) Exemption?
- Section 4(a)(5)?
- What is a Regulation A Exemption?
- What are Regulation D Exemptions?
- What is a Rule 504 Exemption?
- What is a Rule 505 Exemption?
- What is a Rule 506(b) Exemption?
- What is a Rule 506(c) Exemption?
- What is Rule 502(d) and the Rule 144 Safe Harbor?
- Rule 144a
- What are the disclosure requirements for companies employing an exemption?
- What is the requirement to file Form D?
- What is the effect of failing to register an offering under Section 5?
- Liability Under the Securities and Exchange Act of 1933
- What is civil liability under Section 11 of the 33 Act?
- What is civil liability under Section 12 of the 33 Act?
- What are defenses available to charges under Sections 11 and 12?
- What is civil liability under Section 17 of the 33 Act?
- What is potential criminal liability under the 33 Act?
- The Security Exchange Act of 1934
- When must an issuer register pursuant to the 34 Act?
- What disclosures are required of reporting companies under the 34 Act?
- What is liability under Section 10(b) and Rule 10(b)(5)?
- What is insider trading under Rule 10(b)(5)?
- What damages are available under Section 10 and Rule 10(b)(5)?
- What is insider trading under Section 14 of the 34 Act?
- What is liability under Section 16 of the 34 Act?
- What is liability under Section 18 of the 34 Act?
- What is criminal liability under the 34 Act?
- Liability under the Securities Enforcement Remedies Act?
- Blue Sky Laws State Securities Laws
- What are Blue Sky Laws?
- When is an issuer required to comply with state securities laws?
- What are the registration requirements under state law?
- What is Coordinated Registration under state law?